Using medicine terminology, we can say that the Latvian real estate market is currently sick. It will recover only when all transactions will be concluded at fair market value, and those whose expectations are too high, will leave. Such an opinion has Igor Danilevich, the real estate market expert, member of the Latvian Association of Real Estate, Member of the Board of LLC Real Estate Jurmala.

According to him, the market and those who work on it, need to accept this diagnosis, call a spade a spade and endure in order to return with new strength and experience.

The expert identified the main problems which impede the healthy development of the market: the wrong relationship between the client and the agent, random pricing, inaccurate segmentation of real estate, as well as the absence of normal partnership relations between agents.

Danilevich points out that it is unclear what is now the local real estate market - whether it is a buyer's or a seller's market. Owners of projects, setting out the price, do not always fully understand what are the true needs of the final consumer. For his part, the buyer cannot find a suitable offer for himself, however, there are a lot of offers on the market. As an example, Danilevich mentions Jurmala, where a large number of apartments were built during the boom (now approximately 700 apartments are exhibited on the market of Jurmala) and the developers have not thought about, what actually the buyer wants.

“Nothing shall be created artificially”, emphasizes I. Danilevich. “What is the use to grow of 10 tons of potatoes, if the market is selling only 5 tons? Already, construction is carried out to such an extent that it will not be sold even within five years. Statistics shows that our population lags behind the European average size of housing, but we must understand that many people do not buy real estate because they cannot be market participants for various reasons. Instead, it stimulates the development of the rental. The share of “gray sector” on the rental market, I think, still prevails because the SRS mash together all economic entities, and people are afraid of excessive bureaucracy”.

The expert outlined the problem - housing built in the early 2000s, which is still standing and waiting for a buyer, already outdated both morally and physically, it needs investments again to put in order and turn it into a product that will be in demand on the market. Banking real estate companies also have a lot of obscure objects you do not know what to do with them. “I think that by 2018 it will be needed to admit them illiquid and take the painful decision to write off these objects at a loss”, said the expert.

He reminded that property purchased during the credit boom, is now entering the market at the prices, which was once acquired, because its owners are no longer able to fulfill their obligations towards banks. “There are other explanations for such a high price, for example, a lot of money invested in repairs. So what? Real estate costs as much as it costs. There are three prices on the market and two of them are inaccurate. The first and second are “wrong” – the price of rapid implementation, but the third one - the market one, which the buyer is willing to pay in this situation. Those who predict the market meltdown, are mistaken. Meltdown will not occur. Just in one moment artificially inflated price by the seller will turn to the normal, market price”, said Danilevich.

Due to economic and political reasons, interest of non-residents in the direction of the Latvian real estate strongly decreased. The issuance of residence permits in exchange for the purchase of real estate was introduced at the right time in order to attract foreign buyers to Latvia and revive the market after the financial crisis. “Now, although the deals with non-residents have been concluded, there is no more favourable emotional background, each customer has his own story, his own reason to buy in Latvia. Most often it is rational approach: either it is investment with subsequent leasing out of the property, or investment in own potential future place of residence. Recently, however, attitude to the non-residents very changed: for the “Eastern” non-resident, even with the purest biography and with the best intentions some of the obstacles and restrictions are insurmountable. Now it turns out that, while waiting for a rich foreign investor, we are sitting on our real estate portfolios, do not sell to the locals, do not change the price ... How long to wait? What would happen if a rich foreigner will not appear?”, asks I. Danilevich. He does not see the future opportunities for the appearance of a large group of foreign buyers who may be interested in real estate in Latvia at that price and the quality, as it is now.

The national energy company Eesti Energia intends to start production of petrol made from oil shale, deposit of which is located in the east of the country.

Eesti Energia currently produces oil from the shale, so more expensive petrol will be produced there.

“Today we use the gas that is released during the production of oil shale in order to produce electricity, but in the future, we will first educe most valuable part from the gas, from which we will produce shale naphtha”, said Margus Vals, Member of the Board of Eesti Energia.

According to him, the company expects to increase specific weight of shale naphtha within the range of produced products as the most valuable product of oil shale, as well as to increase production of the overall volume of types of liquid fuel by about 10%.

Eesti Energia plans to begin production of its petrol in 2019.

Market

Since olden days Latvia was a shipping point for international trade due to its geographical position. Transport corridors are crossing Latvia from east to west and from north to south. Analysis of the statistics shows that the main flow of goods, mostly transit is moving from east to west through Latvian ports, connecting Russia, the CIS and Asia countries not only with West Europe, but with the whole world.

The transport infrastructure of Latvia is well developed due to a wide network of railways directly connected with the railway system of the CIS and through the Trans-Siberian Railroad with the Far East. Latvian ports of Ventspils, Riga and Liepaja play an important role in the transit trade. They are a convenient gateway for import and export from Russia and other CIS countries. The strategic location of Riga is an important area of production and consumption in the Baltic States; ice-free ports in Ventspils and Liepaja provide favourable conditions for the transport of crude oil and petroleum products. Special economic zones are formed in the most important Latvian ports in Riga, Liepaja and Ventspils in order to create favourable conditions for attracting new business. The advantage of the Latvian ports is their huge potential, including large, undeveloped resources of ports and their territories.

Despite the fact that the road system in Latvia is quite developed, it is still constantly improving. The government's politics is designed to improve the quality of infrastructure and road safety standards in accordance with international requirements. A major transportation corridor is “Via Baltica”, crossing Latvia in the north-south direction. “Via Baltica” is also a part of the European transport corridor: a road E67 connects European cities such as Helsinki, Tallinn, Riga, Kaunas and Warsaw, as well as Riga, Kaliningrad and Gdansk. Latvian air transport system provides safe, quality and affordable services to Latvian and foreign residents. There are two international airports in the country: International Airport "Riga" and Liepaja International Airport, as well as Ventspils Airport. The International Airport "Riga" is the fastest growing airport in the Baltic States.

Latvia has identified as a priority the development of effective, safe and competitive transport system friendly for the environment. The main aim of long-term development of the transport system of Latvia is the full integration of the transport infrastructure of the country in European transport system. Particular attention is paid to the development of coastal cargo transport and combined transport. Ferry services are developed and will continue to develop in the Baltic Sea, involving the port authorities of Latvia to this activity. The main priority is considered to be the construction and development of industrial parks, logistics centres and distribution of cargo flows.

Statistics

Transport and logistics contribute significantly to GDP in Latvia (13% in 2011). 89% of the turnover at Latvian ports, more than 80% of the turnover on the railways and all the transportation of oil and oil products through a system of trunk pipelines are transit. More than 8% of the working population in Latvia is involved in activities of providing the transportation and servicing of transit goods.

Total cargo turnover at Latvian ports was more than 68 million tons in 2011 (an increase compared to 2010 was 12.3%). Transhipment of containers through Latvian ports continues to increase from year to year: it was processed containerized cargo by 19.1% more in 2011 than in 2010 (3.05 million tons).

Railway transport is one of the most promising types of ground transportation, both in terms of security and ecology. Even today it is of great importance in the economy of Latvia. The volume of railway freight service is about 52% as part of the total volume of the country's traffic, but passenger transport - 9%. International transportation in the structure of rail transport is 98%, mainly from Russia and Belarus in Latvian ports (East-West transit corridor); inland transportation is about 2%, which is explained by the relatively short distances. 59.4 million tons of cargo was transported by the railway overall in 2011.

In recent years, a state-owned company "Riga International Airport" has become one of the fastest growing airports in Europe. 5.1 million of passengers has been served at the airport in 2011 (53% of all passengers in the airports of the Baltic countries), which is for 9.5% more compared to 2010. Reaching a number of 5 million passengers, the airport is now officially belongs to the medium-sized airports according to the division of Airports Council International, which are assessed much higher than the small size of the airport at the international level. The number of direct flights from the airport "Riga" is 65.

Business Opportunities

Large world and European transnational enterprises occupy leading positions in the transport sector in Latvia. They act as a joint venture with the Latvian companies or as independent subsidiaries.

The advantage of the sector is the geographical location of Latvia between east and west. There are large international transport and shipment companies that have the ability and competence to improve the quality and level of transportation services and logistics. There is a well-developed infrastructure of roads, railways, air and maritime transport, as well as the availability of skilled labour force, the majority of whose speak three foreign languages ​​(English, Russian, German) is available in Latvia. IT services of high level are available in the transport sector.

Transport and logistics enterprises in Russia, the CIS and the Far East countries can use Latvia as a transport centre for trade with the countries of the European Union and around the world. There are huge opportunities for investment in logistics services, for instance, in freight forwarding and warehousing services, transportation of cargo and goods, their packaging, labeling, use of convenient facilities and comfortable working conditions in free ports and special economic zones in Latvia. As the opportunities for business development it should be indicated offering of its technological expertise in logistics, solutions and technologies in this field and the infrastructure development.

State Politics

Latvia has legislation fully agreed with the requirements of European Union in the field of transport. Latvian transport network is a part of the Trans-European Transport Network TEN-T. The funds provided by the European Union are used actively to improve transport infrastructure. Today the main priority is to increase the volume of containerized cargo in Latvia. Selection of such a priority was identified by the current situation in the global transport business and politics. An increasing amount of cargo is transported in containers due to their high value-added, providing the Latvian entrepreneurs the opportunity to earn more. It is important to maintain and strengthen the positions in the treatment of dry and liquid bulk cargo, paying special attention to attracting goods from new markets. At the moment active working is carried out with China - the development of Eurasian transport corridor with the aim of becoming a gateway for import of goods from China to the EU. Also, works are carried out to ensure the stable and reliable container transport with Russia - regular railway container transportation between the Latvian ports and Moscow. The Latvian transport infrastructure is used to transfer civilian cargo of the USA to Afghanistan since 2009. Also, the work related to promotion the transit of goods from other member countries participating in NATO through the port of Riga is continuing.

Market

Sector of information and communication technologies (ICT) in Latvia began to develop in 1960`s, when the Institute of Mathematics and Computer Science and the Institute of Electronics and Computer Science were established, which developed the technology for the Soviet lunar program. The first Internet connection was created in Latvia with the support of UNESCO in 1992, after which the use of computers and the Internet was increasing from year to year. Latvia was one of the five countries with the highest average speed of the Internet in the world (8.8 Mbps) in 2012; the Internet is available to 92.5% of the population.

The main subsectors of ICT are development of software, mobile applications, home pages and payment card systems, localization services, hosting and data centres e-commerce.

Statistics

More than 2900 (including 403 companies providing electronic communications services) companies actively worked in the sector in 2011. Only 57 companies of the sector are the equipment manufacturers, but 2424 companies (97% of the total number of companies) provide services. Number of people employed in the industry exceeded 18 000 employees.

Although the enterprises of ICT sector experienced the financial crisis, the sector`s turnover exceeded the level of 2009 and reached 2.3 billion euro in 2011. The main export partners in the field of ICT sector are the Netherlands and Sweden, the share of export was 15.6% and 12.3% of total export services of the export in 2011.

Business Opportunities

The development of software for the fields of finance and insurance, electronic banking transactions, billing and ERP systems is at a high level in Latvia. Internet banking is one of the most commonly used e-commerce services. Most commercial banks in Latvia have achieved excellent results and currently about 95% of transactions are made in the electronic environment.

Also, the services of supporting business processes are commonly developed. A high level of education, knowledge of foreign languages the relatively low level of wages and the availability of specialists contribute the development of this type of service. In most cases, the customers of the services of supporting business processes are subsidiaries of larger structures and they often provide services for the entire company.

IT consulting and data processing fields develop actively. Promising areas are the development of mobile applications, e-solutions for government, local government and health care, IT outsourcing, hosting and game development.

The Riga IT Centre was opened in July 2012. The main idea of the Demo Centre is not the allocation of products and services to any particular company, but the opportunity to get acquainted with the achievements of the sector as a whole. The Centre was already visited by the international delegations, including the governmental ones, during which the participants of the Latvian IT-market were able to demonstrate their achievements to potential partners.

State Politics

The Latvian Information Technology Cluster actively works in Latvia, established in 2007. The cluster received additional funding from the EU Structural Funds in 2012 for the project “IT KVAP – Information Technology Cluster`s Embassies, Academy, Platforms”. The main aim of the project is increasing the competitiveness of companies and the industry as a whole, the increase in export volumes, strengthening the interaction of companies of the industry, research organizations and educational institutions in order to eliminate the cracks between the demand and supply of specific IT services by creating a network of agencies/embassies abroad, promoting development of a specific technology platform.

Market

Latvia has rich history of production of agricultural products and foodstuff, this industry is one of the largest manufacturing sectors in Latvia. Latvian`s population, one hundred years ago mainly living in countryside, developed their own cuisine – nourishing, tasty and suitable for people, who spend most of the day working in the field.

Latvian products were highly valued in Russia for decades; this fact reminds unchanged to this day. „Made in Latvia” is a phrase that represents the high and true value of the product.

Rapid development of the market of finished products and by-products is observed on the foodstuff market of Latvia, Eastern Europe and the CIS countries. There is growing interest about national dishes, as well as easy-to-consumption meals and snacks, but at the same time the demand is for healthy food, which opens new opportunities for food and beverage manufacturers.

Connection between the industry and consumer education is one of the most powerful factors that can ensure the successful development of the sector of food and beverages in Latvia. University of Agriculture provides training of highly skilled and well-educated professionals of this field.

The development of agriculture in Latvia has also contributed the development of enterprises engaged in processing of products. Almost all daily necessary products are made in Latvia. Food industry uses the local, as well as imported from other countries agricultural raw materials. The food industry enterprises are located throughout the country.

Statistics

The food industry is the largest manufacturing industry in Latvia. The industry has created about 22% of value added of the manufacturing industry in 2011. The make quantity reached 1.6 billion euro in 2011. About ¾ of all products manufactured in the industry were sold on the local market, the rest were for export. Unit weight of export of the manufactured products was 27% in 2011.

More than 780 companies and private traders were employed in the industry in 2011 and 22% of all those were employed in the industry.

The main export markets of the food industry are Lithuania and Estonia. Hard cheese, butter, milk and powdered milk, canned fish, fruit and berry half-finished products, pickles, variety of grains, meat products, confectionery, alcoholic and soft drinks made in Latvia are popular in Europe. Fruit and berry half-finished products are exported and used in the further production of yoghurts, ice-cream and confectionery. Latvian products are in great demand in the CIS countries as well: Riga sprats, dairy products, canned meat and vegetables are especially well-known for its excellent quality. Latvian products are also sold in the United Arab Emirates, South Africa, United States, Israel and other countries.

Business Opportunities

In recent years, the sector of production of foodstuff of Latvia has been significantly changed: modernized production, which corresponds to European standards now, the requirements of which are strictly observed. Latvian infrastructure provides fast, high-quality and cost effective delivery of products manufactured here to other countries. It was one of the prerequisites for the location of multinational companies here, which want to master not only the Latvian market, but the markets of nearby states as well.

Strict quality standards observed in the production provide that foodstuff made in Latvia find more and more lovers abroad. At the same time, the Latvian products are highly appreciated by buyers in new markets, such as Scandinavia, the United Arab Emirates and others. Latvian producers are able to respond flexibly to the needs of consumers, providing the necessary changes in taste of the products, its packaging, design. Made in Latvia means high quality, tasty and healthy.

State Politics

The sector of production of foodstuff of Latvia has been significantly improved, aided by the support of the state, providing more easy access to the latest technology, proper veterinary care and better auxiliary activity to rural producers. The Latvian government has taken the lead in order to ensure safety and activity control by implementing the state „Program of Quality Control and Food Safety”. The Ministry of Health and the Latvian Food Centre adopt information for local conditions related EU legislation in the field of food and bring it to the attention of the Latvian organizations, which implement them. There is a system, common to all EU countries, where the company is responsible for its own internal HACCP. Many exporters have already decided to work accordingly to the system of ISO 9001-2000. Some of them went ahead and took even higher standards, as required by foreign customers.

Market

Latvia has historically formed and strong science base in the field of chemistry. Latvian chemists have made significant contribution to scientific research until the 19th century. An outstanding scientist of those times is Wilhelm Ostwald (1853-1932), Nobel Laureate (1909). He along with Paul Walden (1863-1957), who was twice presented to the Nobel Prize is considered to be one of the founders of physical and organic chemistry.

Latvia has strong industrial base for the production of high-quality chemicals and medicines. A wide range of products is made in the country – from petrochemical components and synthetic fibre to paints and household chemicals. The most important industrial sectors are the production of fibre, pharmaceuticals medicines, paints, varnishes, soap and cosmetics, rubber and plastic goods. The main sector of the modern pharmaceutical industry includes the production of products for the end user and the generic products, active pharmaceutical ingredients and injections, as well as provides internal services on research and development of new types of drugs and biologically active substances and materials. The pharmaceutical sector is one of the largest holders of the results of cooperation of the Latvian industry and science.

Statistics

The chemical industry has always been included in major manufacturing industries in Latvia. The chemical industry took the fourth place in terms of turnover among the manufacturing industries (7.7%) and the sixth one among other industries by number of employees (6.5%) in 2011. The sector`s volume of output increased by 4.8%, but the turnover by 16.2% compared with 2010 in 2011. The largest part of the sector`s production output is accounted for pharmaceuticals and medical and photochemical products and rubber and plastic goods.

418 companies were actively working in the sector in 2010, which is for 42 more than in 2008. In general, small and medium-sized enterprises are operating in the industry. More than 7000 people were employed in the chemical industry in 2011.

The export of chemical industry was 896.5 million euro in 2011. The export of chemical and pharmaceutical products was 41% and 37% of export of the whole industry respectively. The main export markets are Lithuania, Estonia, the COS countries (mainly Russia), Denmark, Germany, Sweden and the Netherlands. The Latvian chemical and pharmaceutical companies successfully entered such new markets as Australia, Panama, Albania, Brazil, Saudi Arabia in the past five years.

Business Opportunities

The chemical sector has great potential and opportunities for the development and production of many new products. The chemical industry in Latvia has a few sub-sectors without a large pharmaceutical sector. Manufacturers of paints, priming materials and glue make up a large segment that is about 14 companies. More widely is presented the sector of manufacturing of glass fibre. One more sub-sector is manufacturing of rubber, in which the decisive role belongs to one company. There are also manufacturers, who offer standard ceramics. Also, biochemical and agrochemical products, household chemicals, plastic products, building materials (concrete, tiles, products of lime and gypsum) are produced by the Latvian companies.

Main groups of products imported to Latvia are intended for the consumer market, including household and building chemicals, pharmaceuticals and petrochemicals.

Taking into account the high rate of development, the sector constantly needs investment and cooperation with other organizations. Manufacture of semi-finished manufactures for pharmaceuticals such as peptides, amino acids, biopolymers and their derivatives, as well as substances for veterinary medicine can be developed further by combining local raw materials with the potential of Latvian research institutions in the development of new products. The sector of organic chemistry has the potential for development as well, especially the production of organic synthesis products (peptides, derivatives of amino acids, biopolymers) and the production of generic medicines. The studies conducted at the Latvian Institute of Inorganic Chemistry provide a basis for the development of high-temperature synthesis to get nanopowders.

Development trends in this sector suggest the possibility of production of equipment for biotechnology laboratories, bioreactors, biofuel, as well as the development of research activity, production of packaging materials and packaging products, acting as a subcontractor.

State Politics

The legislative base of Latvia in the field of medicine and the protection of intellectual property includes laws, which are fully coordinated with the EU legislation and international agreements and conventions. Since 1993 Latvia is a member of the World Intellectual Property Organization (WIPO) and joined the International Agreement on Trade-Related Aspects of Intellectual Property Rights in 1999, when joined the World Trade Organization. Inventors in Latvia have rights to obtain a patent on the basis of an application, submitted to the Patent Office of the Republic of Latvia. Research in the field of genetics in Latvia is governed by the laws of human genome research.

Market

Manufacture of textile and clothing if one of the corner stone of the Latvian industry, which has long history and traditions. Latvia once was one of the largest producers of flax in the world. Today the sector is equipped with the latest technologies and know-how. Experience and knowledge have led to the creation of products with high added value – silver and amber threads.

Latvia became a place, where many famous European, Russian and worldwide brands place their orders in small amounts, where fast and qualitative execution or ecological manufacturing is important

Also, Latvia is a major centre of the production of lingerie in Eastern Europe with more than 50 manufacturers, located on the shore of the Baltic Sea in the city of Liepaja. The higher concentration of the lingerie manufacturers can be only found in France.

Statistics

In more than 700 Latvian textile enterprises were employed about 12.000 people in 2011. The contribution to this sector to GDP is 4.4%.

The industry of manufacturing of textile and clothing is export-oriented. The main sub-sectors are manufacturing of lingerie, tailoring of ready-made clothes, weaving, machine knitting, manufacture of technical textile and handicraft industry.

The main export partners of Latvia are the EU countries, Russia, Belarus and Ukraine. 23% of the industry`s production was exported to Estonia, but in Russia - 9%, Denmark – 9%, Sweden – 7%, Germany – 7%, Lithuania – 7% in 2011. The goods produced under the „private label” are mainly exported to West, but in Russia and the CIS countries – ready-made clothes and lingerie.

Turnover of the industry amounted in 365.8 million euro in 2011.

Business Opportunities

Competitive advantages of the Latvian companies are numerous, starting from the ability to execute orders in a short time, the production of small amounts to price and quality relations.

Sewing companies dominate in the sector, executing orders for the European and global brands. This opportunity is widely used, because Latvian companies offer a short term of execution of orders and have all the necessary new technologies – starting from embroidery, finishing with laser cutting and manufacturing of waterproof fabrics. Also, the companies offer design, garment designing and pattern services.

Also, the sector is presented by small and medium-sized companies, which work with their own fabrics and promote the idea of environmental clothing.

The Latvian companies present new collections of clothes for adults and children, collections of home textile every year, admired by customers worldwide.

Many well-known companies of motor industry and aerospace technologies praised the competence of Latvian companies, producing fiberglass.

Latvian fashion designers gain international recognition, actively participating in fashion shows and competitions, as well as visiting numerous exhibitions on fashion design.

Another integral part of the textile industry in Latvia is the production of lingerie. Quality and design of the Latvian manufacturers of lingerie were praised at many international exhibitions in Europe and Russia.

The industry monitors the development of trends, seeing the future in the development of the production of technical textile and innovative solutions for motor industry, medicine and other industries.

State Politics

The Association of Latvian Lingerie Manufacturers was established in 2009, the main aim of which is to raise the image of the Latvian manufacturers of lingerie and protect their interests. The Association participates in the familiarization of the EU structural funds, organizes training courses, conferences, attracts European manufacturers and offers other services for its members.

Market

Electronic and electrical industry of Latvia has long and impressive history. The world`s first miniature camera VEF Minox was invented in Latvia in 1937. Telephones and radios made in Latvia are brands, known so far, they are well remembered in the countries of the former USSR. Having survived the transition period in the early 90-ies of the 20th century, the electronic and electrical industry of Latvia has revived and became one of the leading ones in the country.

Today, this industry sector is one of the most promising and the most important in the national economy due to its ability to produce high-tech products.

Industry-leading enterprises have access to all the necessary technology and to provide full production cycle of the production output, including the productions of tools and software development.

Statistics

Electronic and electrical industry has grown rapidly in recent years. The industry`s production output tripled since 2000 and remained stable in recent years. Takeover of the industry exceeded 250 million euro in 2011.

Electronic and electrical industry of Latvia is strategically focused on export, where 85% of the production produced is sent. A large specific weight of export and a large number of export markets demonstrate the competitiveness of the industry on an international level. The main export markets of the industry are the EU countries.

More than 3800 people were employed in the industry in 2011, 2/3 of them were engaged in the manufacture of electrical engineering. Electronic and electrical industry is one of the largest employers of technically and scientifically trained people in Latvia. The average salary in the sector is for 20-40% higher than the average one in manufacturing.

Business Opportunities

Accordingly to increasing export of modern technologies, electronic and electrical industry has great potential for development investments today. Many products are produced in Latvia that have been recognized and praised by the relevant professionals worldwide. The main products are loudspeakers and related devices, wireless data devices, industrial optics, measuring equipment, as well as microphones. Many companies are offering their services for the production of high-quality, certified according to ISO electronic and electrical products – from cable processing and assembly of printed circuit cards to installing and testing of finished products. Also, companies provide services for the development of industrial automation products.

State Politics

In 2012, funding was made to the Latvian Electric and Electronic industry cluster. Currently, the cluster includes 22 companies, 2 research organizations and 1 educational institution. The aim of the project is to promote cooperation of companies, research and educational institutions, increasing the competitiveness of companies and the industry as a whole, stimulating growth in export, innovations and creation of new products.

Market

The Latvian branch of mechanical engineering and metalworking has come a long way of development and currently is a corner stone of the country`s economy. Many foreign companies think that it is gainfully to cooperate with the Latvian suppliers, place orders or make direct investments in metalworking and mechanical engineering industry of Latvia.

The industry uses a variety of technologies, both traditional and the most advanced, innovative engineering solutions. Following the traditions says that metal working and engineering historically developed in Latvia and evolved into one of the leading sectors of the economy. Between the end of the 19^th century to the beginning of the 20^th century and further, during the 21^st century Latvia in general and Riga in particular has been and remains an important industrial region of the Baltic States.

To date, the industry enterprises have been restructured in order to increase their competitiveness in the global market – mainly to establish contract manufacturing of export products. Companies increase efficiency of manufacturing, develop management skills, establish a competitive salary. A significant part of the funds received from the EU structural funds under the economic development program was used for the reconstruction of infrastructure, modernization of production, introduction of new technologies, innovations and training of personnel.

Statistics

Metalworking and mechanical engineering industry has been continuously developing over the last years; production output of the sector was 1.5 billion euro in 2011 - 1/3 of the total production output of processing industries.

The volume of export was 3 billion euro in 2011, what is for 31% more than in 2010. Almost four-fifths of the total production is exported to about 160 countries of the world. Approximately 75% of products are exported to the EU countries. The largest trading partners of the export of the Latvian production of mechanical engineering and metalworking were Poland, Russia, Germany, Sweden and Denmark in 2011. This is clear indication of the fact that products made in Latvia become more and more popular because they have competitive prices, quality and in terms of delivery time.

About 22.600 people were employed in 1000 enterprises of this industry in early 2012.

Business Opportunities

Mechanical engineering and metalworking provide wide possibilities for business in Latvia, because skilled and experienced professionals are working in the industry, whose salary is on a commensurate level. There are several vocational training centres, delivery of orders is short, small and medium-sized enterprises work responsively and flexibly, modern technologies are applied, which allow improving communication and interchange of data.

ISO 9001-2000 and other quality certificates, which are assigned to the Latvian enterprisers, are essential for the formation of professional and long-term partnership. Besides, the willingness and ability to invest in modernization, improving the knowledge and skills of employees, participation in international exhibitions, fairs and competitions – all of this together helps Latvian metalworking enterprises to develop and compete with the East and West enterprises. Transport situation and logistics favours the enterprises of related industries, because there are three major ports in the country (in Riga, Ventspils and Liepaja), working all year round. The long-term plan includes the most promising manufacturing sub-sector of the electronic equipment, tools (templates and matrices), the production of component parts of vehicles and shipbuilding on a contractual basis. Pipelines, high-tech equipment and goods are in demand. It is possible to expand production in other countries where among other key factors are access to the Western Europe markets and successful correlation between the skills of workers and labour costs.

State Politics

In 2012, funding was made to the Metalworking cluster. The main purpose of the cluster is to increase export and productivity of enterprises. The initiative to create the cluster came from the Association of Mechanical Engineering and Metalworking Industries of Latvia, established in 1994 and bringing together more than 150 enterprises. The project highlights the development of technologies for woodworking, timber industry and power industry, production and projection of light building constructions, as well as the provision of specialized services of metalworking as the area of specialization, where a high level of competitiveness has been already reached and there is potential for export of the production.

Market

Latvia is located in the zone of mixed forests and it is one of the richest EU countries concerning forest resources. Forests cover more than 50% of the country. The forest area has almost doubled over the past 70 years, volume of timber increased for 3.6 times, reaching 631 million of cubic meters.

About 50% of forests are owned by the state and managed by the state joint-stock company “Latvian State Forests”.

Forest has a significant role in the formation of the picturesque landscape, as well as it is invaluable for the preservation of natural diversity, recreation of residents and tourism development. An important advantage of the Latvian forests is the fact that their general condition is better, than average in the world. Also, one more advantage is continuous increase of the area of renewable forests. 35,200 hectares of forests have been restored in 2011.

Number of forests, their quality and geographical location of the country in general allows listing Latvia in a number of those countries, in which forestry takes an important place.

Statistics

Accordingly to recent statistical data, 3.01 million hectares of land is covered by forests in Latvia, which is 1.6 times more than the world average index. The greatest forestry value has coniferous forests. Pine-trees and fir-trees make up about 54% of the stock of wood available in the forests. Birch-trees dominate in deciduous forests, which have the same value as conifers in terms of economic value.

Disafforestation and timber export are also increasing with the increase of forest area, timber resources and the demand for wood products. Disafforestation was 12.72 million of cubic meters of wood in 2011, of which 6.69 million of cubic meters of wood (52.6% of the total disafforestation amount) are got from the state forests and 6.03 (47.4% of the total disafforestation amount) is got from the forests belonged to private owners, municipalities and other owners of forests.

In 2011, it had been cut for 0.26 million of cubic meters of wood less compared with the previous year. Basically, the amount of disafforestation has increased in the forests belonged to private owners, namely, for 0.69 million of cubic meters more. The amount of wood cut decreased by 0.95 million of cubic meters in the state forests.

A part of the forest sector in the manufacturing industry is about 25%, but production output reached 1.8 billion euro in 2011. The sector occupies 1/5 of all involved in production, but 30% of the companies registered in Latvia are connected with this sector.

The forest sector is one of the most important export sectors in Latvia. About 75% of the produced in the forest sector is exported. The volume of exports was 1.7 billion euro in 2011; it is for 15% more than in 2010. Traditionally, the main export products are lumber and merchantable wood. Export volumes of paper and carton, wooden packaging and products for construction have increased compared to 2010.

Lumber and round wood are traditionally the main export products of the sector of woodworking industry of export products. In comparison with 2010, the most significant increase in export was shown by sub-sectors of production of paper and carton, wooden packaging and wooden constructing components.

The main export markets of the woodworking industry sector are Sweden, the United Kingdom and Germany.

Business Opportunities

The sector advantages are wide access to local and imported resources of timber, skilled workforce, the industry`s ability to continuous development.

State Politics

Government politics is directed to sustainable development of forestry, which is a key factor of the industry success. A good example of it is the activation of the national program for the development of the forest sector and related industries with the purpose to promoting more efficient use of timber and long-term developing of the sector. The program is being implemented with the support of the Food and Agriculture Organization of the United Nations.