RIO Country Report Latvia 2014

The RIO Country Reports, co-authored by JRC policy analysts and independent experts, give an update on the performance of the national research and innovation systems, and examine policies to address key R&I challenges, assessing their effectiveness. They serve as a tool to inform EU and national policy-makers, and support policy learning in Member States (MS).

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The annual RIO Country Report analyses and assesses the development and performance of the Latvian national research and innovation system and related policies in the perspective of EU strategy and goals.

The report highlights recent national policy and system developments occurring and assesses the match between national policy priorities and the structural challenges of the research and innovation system. It addresses among others:

  • The progress of Latvia towards achieving the Innovation Union, focusing on areas where action is needed;
  • Progress in responding to the ERA actions, particularly in light of the ERA progress report findings published in September 2014
  • Country specific R&D and innovation recommendations as indicated in COM(2014) 400 final '2014 European Semester: Country specific recommendations, Building Growth' adopted by the Commission on 2 June 2014 and endorsed by the Council on 27 June 2014.
  • Progress in tackling research and innovation system challenges beyond those outlined above;
  • Areas highlighted by the Commission's Communication on 'Research and innovation as sources of renewed growth' (COM(2014) 339 final) and its accompanying Staff Working Document 'State of the Innovation Union, taking stock 2010-2014' (SWD(2014 181 final).

The RIO Country Report 2014 builds on the experience of the ERAWATCH project. The ERAWATCH Country Reports from previous years are also available for download on this page. 

Report year
2014
Official publication date
03/09/2015
Geo coverage
Document type
EU Report or Publication

Country Report file

RIO Country Report 2014_Latvia.pdf
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National economic and political context

Since 2010, the economic downturn in Latvia has been replaced by moderate growth but the GDP is still 5.3% smaller than before the recession (at the end of 2007). The major share of Latvia’s GDP (73%) currently derives from the service sector, where only a few companies have a turnover above €100m. So far the global competitiveness of indigenous firms has been achieved mainly due to cuts in labour costs, but further improvement of competitiveness will depend on productivity growth and technology absorption readiness.

ERA priority 2: Optimal transnational co-operation and competition

The existing governance culture and frequent changes of ministers at MoES and MoE, as well as the budget shortages result in a lack of involvement of independent external experts in policy design, monitoring, feasibility studies, performance evaluation and ex-ante and ex-post evaluation procedures. The national policy mix is, to various degrees, aligned with the ERA pillars. Most of the ERA objectives are addressed, though with variable rates of performance, and with support of the EU Structural Funds and FP7 / Horizon 2020 project financing. Almost all national policy measures to support research are targeted to research organisations registered in Latvia and foreign partners could be involved only on a subcontract basis. The cross-border cooperation programmes as well as the Norwegian Government Financial Facility and the Switzerland Government Financial Facility include measures available for joint research activities.

National R&I strategies and policies

With the aim to raise the global competitiveness of the Latvian science, technology and innovation system several policy planning documents have been developed for the planning period 2014-2020 out of which the guiding policy document are the Guidelines for the Development of Science, Technology and Innovation for 2014-2020. The main source of financing for the implementation of activities planned in the Guidelines will still be the EU Structural Funds.

National Reform Programmes 2013 and 2014

The NRP Progress Report outlines that a pre-condition for cohesion financing investment is further consolidation of the number of research institutions, reducing fragmentation and increasing their international competitiveness and capacity for the period 2014–2020, as well as concentrating investments in smart specialisation areas. This goal can be achieved by supporting the design of applications in 2014-2015 for Horizon 2020 programme and by allocating additional financing for PROs on a competitive basis (total available amount of €2m for second call of programme 2.1.1.2). In 2013 48 ERDF financed projects for science were approved thus creating new jobs for young researchers and stimulating collaborative research between industry and academia with a total amount of €23.1m. 24 projects with financing of €9.2m reflect research activities performed in the state’s science priority areas.

ERA priority 3: An open labour market for researchers

Introduction:

Latvia’s academic sector is characterised by institutional autonomy. Taking into account the decreasing trend in statistics of research personnel, providing high-quality education for all, attracting more young people into graduate-level and postgraduate science and technology studies, and promoting the country’s R&D and innovation system are part of a key national strategy.

Open, transparent and merit-based recruitment of researchers:

Latvia’s universities and (independent) state research institutions enjoy a high degree of freedom to set hiring and promotion conditions, as well as career structures. Career progression is decided on at institutional level. The importance of transparent and merit based recruitment, as well as the importance of openness and of attractive research careers is only partly determined by the legal environment and depends more on the institutional level. Besides high levels of decentralisation and institutional autonomy there exist certain centralised limitations and language barriers. The fixed salary level being much below the EU average does not motivate visiting mobility, re-emigration or equality of domestic and foreign scientists. In Latvia, no national-level legal measure specifically related to gender equality could be identified.

Access to and portability of grants:

While research grants are portable to another national research institution, the current law does not regulate the portability of grants to another country. Contracts on publicly-financed research activities are concluded between the funding agencies and the research institutions or higher education institutions. Therefore, national grants are also open to non-residents if they are employees of a contracting institution.

EURAXESS:

Euraxess Latvia provides information and assistance to mobile researchers by means of a web portal (http://www.euraxess.lv/) and with the support of the national Euraxess Services Centre in Riga. The portal contains practical information concerning professional and daily life, as well as information on job and funding opportunities. The service centre offers free of charge up-to-date information and personal assistance for incoming, outgoing and returning mobile researchers and their families.

Doctoral training:

The system of doctoral studies is determined by the Law on Research Activity and by the Law on Higher Education Institutions. Nevertheless, form and content of doctoral studies vary from one institution to another. Although the quantitative indicators have improved in the last five years, the quality of the doctoral programmes has hardly increased. Most doctoral programmes in Latvia have similar problems: insufficient number of international publications of professors, insufficient knowledge of foreign languages and poor cooperation with similar programmes in Latvia and abroad.

HR strategy for researchers (HRS4R) incorporating the Charter and Code:The implementation of the “European Charter for Researchers” and the “Code of Conduct for the Recruitment of Researchers” is not directly promoted at the national level. Few actions or policy measures are taken from national authorities to enable the implementation of the HR Strategy for Researchers incorporating the Charter & Code. The research community is facing pressure for quality from one side and insufficient financial resources to sustain the research environment, physical infrastructure and the frequency of remuneration at the basic level on the other side. Education and training systems:The Latvian education system performs relatively well in relation to European quantitative benchmarks. However, there is a general challenge of improving the quality at all levels of education, increasing participation in life-long learning and improving the currently very low number of graduates in mathematics, technology, computing and science. The current education system does not provide a good match between labour demand and supply.

Policy developments related to Council Country Specific Recommendations

In the medium to long term, Latvia faces a number of challenges, in particular to improve the quality of higher education and science output, to reform social assistance, to build energy links to European networks and further improve the efficiency of the judicial system.

Other science and research recommendations include establishing an independent accreditation agency and a financing model that rewards quality, providing career guidance at all education levels, improving the quality of vocational education and training and developing a more integrated and comprehensive research system by concentrating financing towards internationally competitive research institutions.

ERA priority 5: Optimal circulation and access to scientific knowledge

e-Infrastructures and researchers electronic identity:

Latvian academic institutions have the possibility to connect to the Latvian Academic Network SigmaNet and the European academic network GEANT. Universities explore and look for opportunities to introduce also other services related to e-science, such as Cloud, High Performance Computing, Sensor Grids and others. Part of the capacity of e-science in Latvia and its infrastructure in GRID development, data repositories, cloud and High Performance Computing is developed within State Research Consortia in ICT and signal processing “Iksa Centre” and two State Research Programmes at the Institute of Mathematics and Computer Science of University of Latvia and RTU.

Open Access to publications and data:

Although Open Access policies at regional or institutional level have not yet been adopted in Latvia, the Latvian scientists use opportunities to publish their articles in Open Access journals and repositories in order to achieve wider distribution and availability of research results. The share of Open Access publications in Latvia is 60% of total scientific publications.

Framework conditions

Despite good practices in Latvia in respect to improvement of administrative barriers since 1999 (the country made paying taxes easier for companies by simplifying the VAT returns, enhancing the electronic system for filing corporate income tax returns, reducing employers’ social security contribution rate, upgrading the Insolvency Law) there is still a lot to do. In a recent report OECD emphasises the need to make the tax system more progressive and employment friendly by reducing high labour tax burden and cut red tape. The administrative burden in Latvia is considered above average for start-up entrepreneurs.

Science-based entrepreneurship

Support for new innovative companies is sparse and not oriented towards the needs of companies, with underdeveloped financing instruments. It should be noted that the business incubator network operates mainly in the regions and there is only a relatively low proportion of high growth companies with export potential in the business incubators.

Funding trends

Funding flows:

In Latvia the annual levels of R&D funding over the last decade have been extremely low (0.6% of GDP in 2013) and are mainly based on structural and cohesion financial aid from the EU.

Project vs. institutional allocation of public funding:

Funding for science, research and development comes from three main sources in Latvia: state (public) budget funding, European structural funds allocated nationally and international competitive project funding. In 2012-2013, the national budget was split between institutional funding (40%) and competitive (project-based) (60%) funding.

R&I funding:

Latvia is characterised by critically low funding both by the public and the private sector. Total funding of scientific research in 2013 compared with previous year has fallen by 4.26%. The decreasing trend is seen in private, public and foreign financing, and only universities have increased their spending in scientific research. Financing from the private sector has been decreasing already from 2010, and also financing of innovation has fallen from €333.5m in 2008 to €131.8m in 2010. Innovation activities of companies are dominated by transfer of existing technology and almost 77% of business investment in technological innovation consists of investments in machinery and equipment, and fewer resources are allocated to research and development activities in the company or outside the company. Public funding and provided support instruments do not encourage greater investments from the private sector. Innovative financing solutions (including public-private partnerships) are absent and tax incentives are very recent.

Smart Specialisation

Research policy in Latvia is developed, funded and implemented at the national level. Latvia has a monocentric development model where 83% of all research institutions and the majority of higher education institutions (HEIs) and companies, including high technology companies are concentrated in Riga, the capital city. Outside Riga, economic development and research activities are undertaken in regional growth centres – around the largest cities.

The broad domains for smart specialisation – biotechnologies (knowledge based bio-economy); health (biomedicine, medicine technologies, bio-pharmacy); smart materials and smart engineering system technologies; smart energy; information and communication technologies – were fixed in the Guidelines for the Development of Science, Technology and Innovation for 2014-2020 on December 17, 2013.

Knowledge markets

The system aimed to promote commercialisation of newly created intellectual property (new knowledge or technologies) is fragmented with too many players and limited resources. Formally, universities own all new IPR designed inside their premises and using their research infrastructure. At the same time they do not guarantee that the author will receive fixed and individual income that is comparable with western practices if the invention is commercialised. Although there are organised support programmes for the promotion of inventions and innovations for companies, their involvement is relatively small. Several incentives have been and are implemented with the aim to provide support for commercialisation of inventions, such as the new Intellectual Property Guidelines for 2015-2020.

Evaluations, consultations, foresight exercises

There is a lack of a regular and effective monitoring and review system in Latvia. The main recent comprehensive evaluations are the evaluation of the national research and innovation policy by the CREST Policy Mix Peer Review at the end of 2009, as well as the evaluation of the science and innovation policy in Latvia by TECHNOPOLIS in 2013.

The long term development strategy until 2030 used foresight and other improved strategic intelligence activities, such as technology foresight or roadmaps, industrial research and innovation surveys, studies related to research and innovation policies that provide international analysis of strengths and weaknesses at national and regional levels as well as analyses of emerging opportunities (smart specialisation) and market developments.

Knowledge transfer and open innovation

With the aim to promote cooperation between academia and industry in recent years several incentives have been continued or reintroduced; among them competence centres, technology transfer contact points, cluster initiatives, market oriented research projects, business incubators, new product and technology development programme, BIRTRI initiative and the Motivation programme. As examples for measures to support open innovation and optimal circulation of knowledge between both academia and the private sector as well as within the private sector, two Estonia-Latvia joint projects should be mentioned – Protolab Network and Skills centre.

Performance of the National Research and Innovation system

Latvia is among the EU countries having the lowest level of innovation performance. Latvia performs below the average of the EU for most indicators, particularly for non-EU doctorate students, R&D expenditures in the business sector and Public-private scientific co-publication. Relative strengths are in Youth with upper secondary level education and in Population with completed tertiary education. A high growth is observed for Community trademarks, New doctorate graduates, Population with completed tertiary education and Community designs. A large decline in growth is observed for Non-R&D innovation expenditures.

Structural challenges of the national R&I system

Opportunities to be addressed to increase the level of performance of the national innovation system are set out in the Guidelines for the Development of Science, Technology and Innovation for 2014-2020 and they include: 1) preparation of human resources to be able to use future market opportunities; 2) attraction of qualified high-level recognised mid-age scientists from abroad; 3) consolidation of specialisation areas of science in response to industry demand; 4) promotion of R&D excellence in areas where Latvia already has an asset base and achievements; 5) attraction of foreign investment to those areas where R&D expertise is faced with underdeveloped industry, to promote exports; 6) participation in the scientific programmes of European Union.

Meeting structural challenges

Several measures that were implemented to improve the quality of the system and to strengthen the links between the research and industry sectors have failed to prove their effectiveness since overall R&I performance is not showing any significant improvements. The new Guidelines for the Development of Science, Technology and Innovation for 2014-2020, mentioned above, have introduced a number of measures to improve the R&I system. These include the improvement of technology transfer possibilities, access to research infrastructure, development of competence centres, and introduction of a new model for the management of the R&I system.

Innovation framework for SMEs

Policy measures to support SMEs include activities to improve the legal environment to promote micro-enterprises, to provide financing for SME growth, mainly based on Altum administrated support to self-employed persons and early-stage entrepreneurs, a support programme for competitiveness of commercial entities, micro-loans, SME expansion loans, the agriculture working capital programme and the support programme to purchase agricultural land. The Latvian Guarantee Agency implements the ESF based 2.2.1.3. Programme “Guarantees to increase competitiveness of commercial entities”, issues loan guarantees, offers short-term export loan guarantees, and supports mezzanine loans. In addition, there are expansion capital and seed capital programmes and funds. The Investment and Development Agency of Latvia and the Latvian Technology Centre provide access to EU Enterprise Europe Network services (EEN).

Venture capital markets

The first generation of Latvian public venture capital programmes was launched in 2005 and so far five programmes have either been launched or are being planned. However, the programmes have failed to address the demand side. The reported evidence suggests there are not enough good projects to invest in, while at the same time Latvian entrepreneurs look for venture capital outside Latvia.

Innovative public procurement

Innovative public procurement as demand-side policy to encourage creation of innovations in Latvia is seldom used, and there is no national target for public procurement of innovative goods and services. According to the results of the Global Competitiveness Report 2014-2015 latvia ranks 92nd among 144 countries for government procurement of advanced tech products.

The country in the European R&I landscape

Latvia is a small economy with a population slightly below 2 million (in the beginning of 2014 that made 0.4% of the EU-28 population). The GDP per capita in PPS in 2013 constituted only 67% of the EU-28 average. GDP growth in the last 3 years has slowed down from 5.3% in 2011 to 4.1% in 2013. GERD witnessed a drop from 0.70% in 2011 to 0.66% in 2012 and 0.6% in 2013. The situation in 2012 and 2013 was improved by the inflow of EU Structural Funds (SF) and FP7 project investments.

Main features of the R&I system

National R&D funding in Latvia is dominated by the public sector and has demonstrated rather notable fluctuations over the last decade at a comparatively low general reference level. GBAORD as a percentage of total general government expenditure in 2012 was only 0.4% in comparison to the EU-28 average of 1.42%. The annual allocations of state budget funding for R&D have so far been low and highly dependent on the economic performance of the country, with low commitment of the government under conditions of tight national budget. Since 2009 public funding for R&D has become excessively dependent on EU SFs.

Structure of the national research and innovation system and its governance

The highest management level in the national research and innovation system is occupied by the Saeima (Parliament) and the Cabinet of Ministers where the Saeima has the supreme legislative power and the Cabinet of Ministers is the highest executive body. The Cabinet of Ministers determines the country’s scientific, technological development and innovation policy, but the policy's development is the responsibility of the Ministry of Education and Science (MoES) and the Ministry of Economics (MoE). MoES and MoE cooperate with other ministries and if necessary consult with industry associations and social partners. The main research performers in Latvia are represented by higher education institutions and their research institutes as well as 12 independent state research institutes with certain research activities undertaken also by enterprises. The current enterprise structure of Latvia is composed mainly of small- and medium-sized enterprises (SMEs) (99.6%), of which 86.2% are micro-enterprises, the majority in the low and medium technology sector.

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