1. IT Market Research Report on Latvia Tatiana Rikure Inga Bakane

2. General information Capital: Riga (population 788,283) Population: 2.6 Million Total area: 64 100 sq. Km Languages: Latvian (official) Russian, English widely spoken Independence: 1991 Borders with: Estonia to the north, Russia and Belarus to the east and Lithuania to the south, and a maritime border with Sweden to the west Ethnic composition: Latvian 58.2%, Russian 29.19%, Belarusian 3.99%, Ukrainian 2.63%, Polish 2.49%, Lithuanian 1.39%, other 2.11% Major religion: Christianity Main exports: Timber and wood products, fish and fish products President: Vaira Vike-Freiberga

3. Key facts & figures Membership in official organizations: European Union, NATO, UN, Council of Europe, WTO, OSCE, Council of the Baltic Sea States, Euro-Atlantic Partnership Council. * Central Statistical Bureau of Latvia, www.csb.lvwww.csb.lv Economy*: GDP: 11.0 billions EUR (2004) GDP growth in 2004: 8.5% (average over 5 years: 6.2%) FDI inflow: 434 mil. EUR (2004)

4. Business environment Latvia is one of the more advanced, fast growing 'transition' economies and has well-developed services, transportation network and logistics. There is a well- developed banking system, stable political and monetary conditions, and a favourable taxation regime (From 1 January 2002, the Latvian corporate income tax was reduced from a flat rate of 25% to a flat rate of 22%. The rate was 19% in 2003 and dropped to 15% from 2004). Latvia boasts one of the best international credit ratings in Central and Eastern Europe. Standard & Poor's has given Latvia an "A-minus/stable" rating, while Fitch-IBCA has rated the economy "A-minus/positive".

5. Latvian promising business sectors: Manufacturing (growth in 2003): 9.1% Food & Beverage (24.9%) Forest & Wood (20.4%) Machinery & Electronics (14.6%) Metal processing (9.7%) Textiles (9.6%) Paper, Publishing & printing (7.6%) Chemicals & pharmaceuticals (4.4%) Other (8.8%) Services(growth in 2003): 6.8% Trade (11.3%) Transport & Communications (8.9%) Real Estate & Business Services (2.3%) Financial Operations (10.4%) Source: Central Statistical Bureau of Latvia, 2004

6. Services: IT & Telecommunications The IT&T industry is Latvia's fastest growing economic sector with a yearly growth by 20 - 30 % during the last decade. Exports of the sector are rapidly rising in the last years, annually growing by approximately 15%. The industry's main asset is highly qualified human resources with more than 8 000 graduate IT specialists and an additional 6 000 in universities and colleges. Key advantages of the sector: internationally competitive human resources at all levels of expertise at very competitive costs, highly developed telecom and data transmission infrastructure.

7. Infrastructure Penetration of ICT20022005 PCs/1001933 Internet/100625 Mobile Cell Phone/10034,259 Enterprises which have at least one computer51 75 Enterprises with Internet connections36>50

8. Production THE STRUCTURE OF INFORMATION TECHNOLOGY BRANCH IN LATVIA

9. DISTRIBUTION OF QUALIFICATION LEVELS IN IT SECTORS

10. STATE FINANCING OF RESEARCH

11. NUMBER OF STUDENTS IN STUDY YEAR 2004/2005 Total number – 130693 Computer science and IT students 10% Number of graduates 1000 Number of PhD thesis in mathematics and IT – 22

12. DISTRIBUTION OF STUDENTS ACCORDING TO STUDY PROGRAMMES 2003/2004

13. Despite the existing barriers to the Internet penetration in Latvia (insufficiently developed telecom infrastructure, high Internet access costs, etc.) its popularity increases each year. Number of Internet users in Latvia is growing

14. In Latvia the household’s access to the Internet (7%) is lower than NAS- 10 average (11%), strongly lower than EU-15 average (44%) and far behind the level of leading country Netherlands (72%). The worse figure has only Romania (4%).

15. e-Work Seven percent of the EU-15 and nearly three percent of NAS-10 working population are presently teleworking from home, at least part of their working time