Higher education is one of the main drivers of national economic development. Universities roll out highly skilled engineers, doctors and managers and deliver cutting edge research for both public and private sectors. This educated human capital is particularly important to developing and enhancing the competitiveness of a small state with few natural resources like Latvia.

Over the last two decades’ higher education has also emerged as a valuable and much sought after international tradeable service. Countries are increasing competing for the almost five million international students currently studying outside their home countries. Indeed, the OECD estimates the global growth in international education as being around 6% annually and global international student numbers have doubled since 2000.

There are four main rationales for this growth in student numbers. First, incoming students can bring direct economic benefits in the form of increased revenues for universities and the state as well as long-term economic benefits in the form of international relationships and networks. Second, interaction with domestic students builds inter-cultural skills which are a key resource in the globalized world. Third, international students enhance the university environment, bringing different skills and perspectives to teaching and research. Finally, international students can also be used as an instrument that reinforces links between countries (especially if former students go on to become policy leaders). Latvia has rapidly developed into a major exporter of higher education, with more than 5,500 full-time international students for a qualification or degree in a Latvian higher education institution in the 2015/2016 academic year (and more than 1,000 Erasmus and other exchange programme students also studying in Latvia). Students come from both Western Europe (particularly Germany and the Nordic states), the Commonwealth of Independent States and South East Asia (particularly India and Sri Lanka). Most international students are undergraduates studying for a qualification or degree and are typically self-financed. This research analyses the rapid growth of the higher education export sector in Latvia and abroad and then considers how to raise Latvia’s competitiveness in this high growth sector of the economy. The final section offers recommendations for policy-makers.