Books on Latvia
Update No: 289- (27/01/05)
Manufacturing companies come to Latvia
The European Union's 10 new member countries are attracting new manufacturing
companies from across Europe. Latvia, which has seen its fair share of foreign
investment since EU membership in May, has ambitions to become one of the most
appealing destinations for producers-exporters.
Recently the Cabinet of Ministers approved an export development plan for 2005 -
2009. The main thrust of the plan is to give a boost to Latvian manufacturers'
competitive edge and to help them find new markets for their products. To
demonstrate the seriousness of the government's intentions, Prime Minister,
Indulis Emsis, on September 24 even toured Lavijas Finieris, one of Latvia's
leading wood-processing plants.
In one of the biggest manufacturing-related investments this year, the U.S.
fibreboard company Jeld-Wen announced it would build a 40 million euro wood-
treatment facility in Latvia, which management ultimately chose over Spain. The
factory will produce fibreboard skins, 95 percent of which will be exported for
use in Jeld-Wen factories across Europe.
Latvia's membership in the EU significantly influenced the company's decision to
stay in the Baltic country, says Ralfs Dakters, a client executive in the
Latvian Investment and Development Agency's investment and trade promotion
"The first attraction for Jeld-Wen was EU criteria. They needed to build in
the EU, as they will be exporting to the other Jeld-Wen factories in
Europe," says Dakters. "The second attraction was the low corporate
income tax, which is only 15 percent in Latvia. The third attraction was the
natural resources. The type of wood fibre here suited their needs, plus it was
of a high quality and quantity."
Jeld-Wen, which was established in Latvia in 1994, is also aware of the
country's cost-effective labour benefits. The average gross monthly wage in
Latvia is approximately 200 lats (300 euros).
In another high-profile project, Germany's AKG, a manufacturer of vehicle
radiators, teamed up with Russian automotive producer ZIL, to invest 20 million
euros into a new factory that will create 250 jobs in Jelgava over the next
As Dakters explains, "With accession to the EU - coupled with Latvia's
geography of having the European market on the left and the CIS market on the
right - Latvia has become a 'one-stop shop' for foreign investors."
Indeed, Latvia ranks among the top 10 countries internationally in terms of
business start-up time and length of bankruptcy procedures. According to a World
Bank report, one can register a business in Latvia within two business days.
"We now have a good quality of projects coming into Latvia from across the
globe," says Dakters.
Latvia has access to a consumer market of over 660 million, and its abundance of
sea and road transport links provides easy accessibility to surrounding
countries - hence, the importance of the government's manufacturing development
"The government is now showing their intention to be an investment-friendly
country. Not just saying it, but actually doing it," says Dakters.
Through LIDA, the government has proved its commitment to foreign investors,
offering not only start-up help, but also support after the investment's
implementation. Foreign representatives of LIDA situated in France, Germany,
Russia, Kazakhstan, the Netherlands, U.K. and Sweden - with offices in Norway
and Denmark - testify to Latvia's intention of attracting foreign manufacturers.
Investors also have the opportunity to enter the state support program, which
offers grants for entrepreneurship, participation in international exhibitions,
modernization, the development of new products, and for increasing the
qualifications of employees.
As if this is not enough, LIDA is currently accepting applications for EU
"The grants which are being offered at the moment are an additional
incentive for foreign investors," Dakters says. "Many grants are
geared specifically for manufacturing companies. We definitely hope to attract
more manufacturers from abroad."
More investment from Latvijas Gaze
Latvian gas distribution company Latvijas Gaze plans to invest 120m lats in
development in 2005-2010, company president, Adrians Davis, said at an
extra-ordinary shareholders' meeting on December 3rd, New Europe reported.
He said that these funds would be used to increased the reliability of gas
supply infrastucture, increase the capacity of the Incukalns underground gas
storage facility and also to build new pipelines. Over the next year Latvijas
Gaze will decide on increasing the capacity of the Incukalns underground gas
storage facility from 2.3bn cubic metres at present to 5.0-6.2bn cubic metres.
"This is due to the need to implement a project to supply southern Finland
with gas from Incukalns," Davis said.
The second project in terms of investment is to build gas pipelines in Latvia.
He explained the company plans to build about 200km of pipelines per year. The
company's budget for 2005, which was approved on December 3rd, includes
investment of 24.88m lats, which was a little less than planned investment for
last year. Davis said that the company justified its request to the Latvian
regulator to increase gas tariffs.
Investments surge 50% in Latvia
In the first three quarters of 2004, foreign investments pouring into Latvian
companies and banks went up 50.5% in a year, totalling 695.4m lats, the Bank of
Latvia announced recently, New Europe reported.
In the same period foreign investments made by Latvian companies totalled 437.6m
lats, so net inflow was 257.8m lats or 124.4m lats more than the same period as
the year before, the Bank of Latvia said. Increase of funds assigned of
re-investment of profits (part of the profit which is not paid out to the
shareholders but invested back into the growth of company) was of 55.6m lats and
investments in the other capital forms (loans, lending, trade credits) was up
63m lats. Nearly half of all investments for the same period came from three
countries - Estonia (61.5m lats), Finland (29.4m lats) and the United Kingdom
Ventspils Nafta builds new rail terminal
Ventspils Nafta Terminals, a subsidiary of the holding company Ventspils Nafta,
has completed construction of a rail platform for oil and oil products at a
total cost of 12.9m lats, Ventspils Nafta Press Secretary, Gundega Varpa, said
recently, the Baltic News Service reported.
The new rail terminal has a capacity of 4.5m tonnes of crude oil or 5.5m tonnes
of diesel per year; it is 402m long and can unload 66 tank cars simultaneously.
The press secretary said that the new platform would make it possible to improve
the use of the terminal's capacity, increase the assortment of freight being
trans-shipped and avoid having tank cars standing idle. Unlike the other three
rail platforms at the terminal, at which only oil products can be unloaded, the
new platform can handle both types of freight. Ventspils Nafta transhipped 7.3m
tonnes of oil and oil products in the first 10 months of 2004, down 24 per cent