1. Innovation in the Latvian public sector

The OECD Observatory of Public Sector Innovation (OPSI) defines innovation as something that is new or novel to the context, implemented and aims to achieve impact (such as improved outcomes, effectiveness, satisfaction or efficiency) (OECD, 2017[1]). Examples could include new ways of engaging citizens to ensure services meet their needs, finding efficiencies in administrative process, or using new methods (such as strategic foresight) to make governments more resilient.

Innovative capacity looks at the holistic ability for public sector systems (individuals, organisations, system and ecosystem) to work in innovative ways to improve public sector outcomes (e.g., user impact, satisfaction in services, trust in government, economic opportunities, access to education etc.). Beyond improving public outcomes, stewarding an innovative public sector can help make the public sector a workplace of choice (Kaur et al., 2022[2]). Innovative capacity recognises that innovation is influenced by the system around it (e.g., how institutions work together, political influences, accountability frameworks, audit, individual skills, organisational leadership, performance management, measurement and evaluation approaches).

For innovations and innovative approaches to be successful… they require a systemic approach: one that is both top-down and bottom-up and does not seek to “tick an innovation box” or be a Senior Executive’s pet hobby or a passing phase. If embraced effectively, innovation can be a powerful and practical lever. (Kaur et al., 2022[2])

In order to implement a systemic approach to innovation, a blend of explicit supports (e.g., innovation labs, innovation strategy, innovation skills programmes) should be paired with cross-government supports across the system (e.g., working with procurement, regulatory, financial, accountability and workforce management mechanisms) to better enable working in new and novel ways.

There is recognition of the need for innovation in the Latvian public sector, as well as a number of promising initiatives and strategies that can be strong levers for promoting and supporting greater innovative capacity. In addition to the key institutional responsibilities for innovation, four contextual aspects are particularly important in interpreting the findings of this report: strategic priorities and plans, trust in government, a focus on financial efficiency, and Latvia’s innovation trajectory.

Institutional settings and key actors

In the Latvian public sector, the Latvian State Chancellery, plays a key role in setting and implementing a strategic vision for innovation in the public sector. Since the integration of the Cross-Sectoral Coordination Centre into the organisation, it is also responsible for coordinating innovative initiatives across the public sector (Cabinet of Ministers, 2023[3]). This is set to continue as the Public Administration Development Division will be central to implementing the Public Administration Modernisation Plan 2027 and a future innovation strategy and action plan. The Innovation Laboratory is also based within the State Chancellery. It coordinates the Innovation Network and provides key innovation related training programmes, including training to public servants and senior management in innovative methods such as design sprints. Furthermore, the Chancellery coordinated intersectorally; organising and supporting innovations across state owned enterprises.

Beyond the State Chancellery, a number of public sector organisations and surrounding actors play a particularly important role (OECD Observatory of Public Sector Innovation, 2021[4]):

  • School of Public Administration: Provides design thinking courses.

  • Latvia Investment and Development Agency: Leads cross-sectoral efforts focused on research, development and innovation, piloting work in the area of Anticipatory Innovation Governance (OECD, 2023[5]).

  • Ministry of Environmental Protection and Regional Development: Responsible for leading digital transformation in the public sector, serves a key function in steering the implementation of reforms relevant at a municipal level.

  • Ministry of Finance: Manages budgetary allocations and reporting.

  • State Audit Office: Helps to identify opportunities for innovation aimed at improving efficiency and public interest through its audit assessments.

  • Ministry of Culture: Leads by example by spearheading innovative initiatives including Creativity Week and hosting the original Design Council.

  • Ministry of Economics: Serves a key role in innovative procurement.

  • Innovation Ecosystem: State-owned enterprises, non-profit actors, private sector businesses, academia and research bodies and civil society groups can play an important role in innovative initiatives.

The Government of Latvia is working closely with European Commission, OECD and international partners to increase the use of innovative approaches at the national and municipal levels via a number of strategic projects contributing – directly and indirectly – to public sector innovation.

The recently adopted Public Administration Modernisation Plan 2023-2027 highlights key priority areas for government transformation including digital transformation, human resource development, innovation, sectoral policies, efficiency of internal processes and compliance with regulations (Latvian Chancellery, 2022[6]). These priorities are reinforced through Latvia’s National Recovery and Resilience Plan (RRP), projects supported by the European Commission’s Technical Support Instrument (TSI) and additional initiatives through Norway Grants and other supporters. In some areas, Latvia is already performing strongly. For example, Latvia has one of the largest shares of renewable energy in the EU (European Commission, 2023[7]).

Latvia’s National Recovery and Resilience Plan, which provides 1.8 billion euros in grants offers a massive influx of funding that is expected to stimulate and support innovation in the public sector and beyond. Priority areas include green climate transition challenges (e.g., transport, energy efficiency of buildings), digital transformation of public services (e.g., digital upskilling, improved research and innovation environments), economic and social resilience and modernisation of the healthcare system (European Commission, n.d.[8]).

Through European Union cohesion policy programs for 2021-2027, over 15.5 million euros will be directly dedicated to strengthening innovative capabilities in the municipal government (VARAM, 2023[9]). The “Smart Municipalities” programme will provide financial support to develop and implement innovative solution, technology, process, service or product innovation, which improves the efficiency of the services provided by municipalities and which has a potential to contribute to a Latvian-wide innovation landscape.

The European Economic Area and Norway grants also offer opportunities for enhancing the efficiency of policies and the capacity of public institutions to meet citizens’ needs. One of such initiatives in Latvia is the “Facilitation of inter-municipal cooperation and enhancement of good governance principles in Latvian local governments” programme led by Latvian Association of Local and Regional Governments and implemented between 2021 and 2024 (Latvian Association of Local and Regional Governments, 2021[10]).

Furthermore, partnerships between the Latvian government and the European Commission through TSI projects has led to innovative initiatives on strengthening co-operation between levels of government, human centric digital government services, strengthening corruption prevention and improving health technology assessments. These projects are part of 54 TSI projects which have been financed in Latvia through the TSI and Structural Reform Support Programme, have provided significant funding to enhance the effectiveness of government (European Commission, 2022[11]). Included amongst these initiatives was a scan of the public sector innovation system of Latvia and a study on the use of anticipatory innovation governance in ecosystem management (OECD, 2023[5]) specifically targeting the use of innovative approaches in the public sector.

Additionally, priorities set out in the National Development Plan for Latvia (2021 – 2027) (Latvian State Chancellery, 2020[12]) could prove to be key drivers of innovative approaches. These priorities include:

  • Strong Families, a Healthy and Active Population

  • Knowledge and Skills for Personal and National Growth

  • Business Competitiveness and Material Well-being

  • Quality Living Environment and Regional Development

  • Culture and Sport for an Active Lifestyle

  • A United & Open, Safe and Secure Society

Efforts to address these priorities are well underway, including a digital health strategy and a healthcare workforce strategy (European Commission, 2023[7]) However, there remain areas where improvement is needed, for example, Latvia is performing poorly on SDG 1: No poverty, SDG 3: Good health and wellbeing, SDG10: Inequalities and SDG13: Climate action (European Commission, 2023[7]). Moreover, the share of population unable to access adequate healthcare was nearly double the EU average in 2021 (European Commission, 2023[7]), this is likely to increase with the aging population requiring additional care. These challenges demonstrate the necessity to leverage innovative approaches to meet citizen needs.

Tackling these priority areas is not simple: Latvia is facing the consequences of Russia’s full-scale war in Ukraine which has caused trickle down impacts including an energy price increase of 48.8% (significantly above the EU average) and consumer price inflation of 17.2% (European Commission, 2023[7]). Despite this, Latvia’s productivity growth remains strong and above the EU average and the labour market is performing well (European Commission, 2023[7]). The European Commission noted in its 2023 Country Report a number of key challenges facing the country, including weak innovation performance, aging population and share of low skilled people (European Commission, 2023[7]).

These strategies and projects showcase that there should be no shortage of ambition for innovation in the Latvian public sector. However, an ongoing effort is required to ensure these multiple strategic plans and projects work cohesively to achieve their goals. Leveraging innovative approaches that build the innovative capacity of the public sector is an important part increasing cohesion and steering towards success.

There is growing recognition of how increased innovation capacity of the public sector can address key public sector challenges and wider public agendas in Latvia and beyond (OECD, 2022[13]). For example, trust in Government remains a significant issue in Latvia. The 2021 OECD indicators of trust found that only 29.5% of respondents indicated that they trusted their national government (OECD, 2023[14]). This research highlighted strong awareness of the potential for working in innovative ways to renew the relationship between citizens and governments and contribute to wider public agendas. Hence, there is a strong relationship between innovative government behaviours and responsiveness (e.g. adoption of innovative ideas), reliability of government (e.g. preparedness for the future), and trust of citizens in government (OECD, 2022[13]) These themes are explored in depth in Chapter 2: Detailed findings – national level.

Issues relating to trust were also identified when exploring the relationship between national and municipal level government. Despite a relatively high level of autonomy and devolved remit of power and public service responsibilities (European Commission, 2021[15]) municipal civil servants reported lack of trust from central government as a barrier to more local innovation, and national level public servants also raised issues of confidence and trust in municipal actors.

Throughout the last decades, budget pressures in the Latvian public sector have led to innovations targeting mostly cost savings. Innovative efforts have consequently prioritised efficiency rather than larger cross-cutting innovative transformations. This pressure has been underscored by senior decision makers and public servants engaged in this research process and evidenced by low overall public expenditures. Government spending in 2021 came to 44.1% of GDP, which remains below the OECD average (OECD, 2023[16]). Similarly, in areas such as healthcare and education, the Latvian government’s expenditures remain below OECD averages (OECD, 2023[17]; OECD, 2023[18]). Despite this, the public sector workforce is larger than the OECD average, which has consequences on public sector salaries, budgets and operating environments (OECD, 2021[19]). Consequently, innovation to find immediate efficiencies is often favoured over innovation that aims at improving long term outcomes. The European Commission has also indicated that systemic underfunding of public services in Latvia is standing in the way of structural change (European Commission, 2023[7]).

The focus on short term priorities and efficiencies is similarly observed in progress reports on European Commission priorities (European Commission, 2023[7]). For example, limited progress has been made on 2021 Country Specific Recommendation 1: Give priority to fiscal structural reforms that will help provide financing for public policy priorities and contribute to the long-term sustainability of public finances, including, where relevant, by strengthening the coverage, adequacy, and sustainability of health and social protection systems for all. This report suggests a significant opportunity to shift the use of innovation from a mechanism to improve efficiency towards a resource to enhance effectiveness and steer the country towards prosperous futures.

In addition to the broader strategic plans contributing to innovation in the public sector, there are a number of specific innovative efforts worth highlighting. These represent concrete examples of where initiatives have been implemented to leverage innovation in the Latvian public sector. The below table showcases a number of key milestones which have marked this journey.

The above efforts showcase key steps and reforms as Latvia moves towards the more systemic and intentional use of innovation in the public sector. Despite these efforts, initiatives and capabilities to support innovation remain scattered and a systemic approach to innovation that recognises its transformative and cross-cutting nature is lacking. To provide an initial assessment on the country’s public sector innovation and guide the country on its innovation journey, the OECD Observatory of Public Sector Innovation worked with the Latvian State Chancellery to conduct a Public Sector Innovation Scan with the support of the European Union’s technical support instrument. This project takes stock of the actions completed since the previous scan and identifies opportunities to further a systems approach to innovation in Latvia. It is designed to directly link recommendations to a future innovation strategy and action plan to prompt meaningful action. The below table maps the recommended actions of this project to progresses made.

As seen above, the progression on each of the recommended actions has varied – indicating a need to build implementation capacity for the suggested recommendations of the previous assessment report and the forthcoming innovation strategy and action plan (key deliverables of this project).


[3] Cabinet of Ministers (2023), State Chancellery is strengthened as government centre by adding functions of the Cross-Sectoral Coordination Centre, https://www.mk.gov.lv/en/article/state-chancellery-strengthened-government-centre-adding-functions-cross-sectoral-coordination-centre.

[7] European Commission (2023), 2023 Country Report Latvia, https://economy-finance.ec.europa.eu/system/files/2023-05/LV_SWD_2023_614_en.pdf.

[11] European Commission (2022), Supporting Reforms in Latvia: Technical Support Instrument 2022 - Country Factsheet, https://reform-support.ec.europa.eu/supporting-reforms-latvia-tsi-2022_en.

[15] European Commission (2021), Public Administration and Governance, https://doi.org/10.2887/504943.

[8] European Commission (n.d.), Latvia’s Recovery and Resilience Plan, https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-resilience-facility/latvias-recovery-and-resilience-plan_en.

[2] Kaur, M. et al. (2022), “Innovative capacity of governments: A systemic framework”, OECD Working Papers on Public Governance, No. 51, OECD Publishing, Paris, https://doi.org/10.1787/52389006-en.

[10] Latvian Association of Local and Regional Governments (2021), Facilitation of inter-municipal cooperation and enhancement of good governance principles in Latvian local governments, https://www.lps.lv/en/projects/projects-ongoing/38-facilitation-of-inter-municipal-cooperation-and-enhancement-of-good-governance-principles-in-latvian-local-governments.

[6] Latvian Chancellery (2022), Stratēģiskās plānošanas vadlīnijas valsts pārvaldes iestādēm - Strategic Planning Guidelines, https://www.mk.gov.lv/lv/media/12837/download.

[12] Latvian State Chancellery (2020), National Development Plan for Latvia: 2021-2027, https://www.mk.gov.lv/en/media/15165/download?attachment.

[16] OECD (2023), General government spending (indicator), https://doi.org/10.1787/a31cbf4d-en (accessed on 20 June 2023).

[18] OECD (2023), Health spending (indicator), https://doi.org/10.1787/8643de7e-en (accessed on 20 June 2023).

[17] OECD (2023), Public spending on education (indicator), https://doi.org/10.1787/f99b45d0-en (accessed on 20 June 2023).

[5] OECD (2023), The Public Governance of Anticipatory Innovation Ecosystems in Latvia: Exploring Applications in Key Sectors, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/83170d2e-en.

[14] OECD (2023), Trust in government (indicator), https://doi.org/10.1787/1de9675e-en (accessed on 10 August 2023).

[13] OECD (2022), Building Trust to Reinforce Democracy: Main Findings from the 2021 OECD Survey on Drivers of Trust in Public Institutions, Building Trust in Public Institutions, OECD Publishing, Paris, https://doi.org/10.1787/b407f99c-en.

[19] OECD (2021), Government at a Glance 2021, OECD Publishing, Paris, https://doi.org/10.1787/1c258f55-en.

[1] OECD (2017), Fostering Innovation in the Public Sector, OECD Publishing, Paris, https://doi.org/10.1787/9789264270879-en.

[21] OECD Observatory of Public Sector Innovation (2021), Public Sector Innovation Facets: Innovation portfolios, https://oecd-opsi.org/publications/facets-portfolios/.

[4] OECD Observatory of Public Sector Innovation (2021), The Innovation System of the Public Service of Latvia, https://oecd-opsi.org/wp-content/uploads/2021/03/Country-Scan-of-Latvia.pdf.

[20] OECD OPSI (2023), National Level Survey on Innovative Capacity in the Latvian Public Sector.

[9] VARAM (2023), Smart Municipalities, https://www.varam.gov.lv/lv/viedas-pasvaldibas.

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