Business, Direct Speech, Economics, Energy, EU – Baltic States, Investments, Latvia, Markets and Companies

Naturally the starting point was not the most favorable: Infrastructure missing or disabled, industrial base created during Soviet time and standard of living close to the average eastern European country. But this did not prevent Latvia to take huge steps towards freedom, improving standard of living and general development of the society and economy. How has this been possible and what were the main obstacles on way to change and development within only a quarter of decenium?

The population of the Latvia is today 2,03 million representing only some 2% of the Baltic Sea region. The nation has always been fast and flexible; able to change rapidly its direction. The central location between two other Baltic countries has also supported Latvia and ice free ports have been a strong value for trade and exports. Good education system and R&D of certain industrial fields have made it possible to create some top quality European enterprises. However, nothing happens without high spirit and strong will and awareness of the glorious past. In the history Latvia has always faced dramatic times and it has been under several occupations; first under German knights and Hanseatic leage, then under Sweden and later part of Russian Empire. Latvia has always benefitted from it’s position as a gate between east and west.

High quality education system both in technical and economical faculties of Riga generates educated workforce for needs of Latvian enterprises. One should not forget the other studies Latvian Universities offers just to mention agriculture, forest sciences, medical and different arts. Today it is not difficult to find competitive, skillful and well educated management when expanding activities towards Latvia.

When visiting Riga, one finds out great architectural treasures and it is easy to imagine the standard of living a century ago. The same high quality goes with different fields of arts no matter if one compares music, ballet, opera, hand crafts, design or just visits some of the excellent restaurants of Riga. A certain flavor of art is everywhere and in many cases this has been successfully combined to different fields of business activity. Of course there some exceptions and for example the opinions may vary when judging the architecture of the recent library. In general Latvians are innovative, creative and ready for something new.

When competing with other European nations Latvian economy has shown excellent GDP growth rate over the last years. After several highly intense years of economical growth starting in 1999 and lasting to 2007, world wide finance crisis hit Latvia even harder than any other European nation. The GDP dropped some 18% in 2009 and unemployment rate was close to 26%. That time the youngest European Prime Minister Valdis Dombrovskis was facing extremely difficult and demanding task to guide Latvia towards stability and growth and he did it with success. Each and every Latvian citizen was paying the bill by cutting their salary, benefit or pension and the standard of living dropped widely. After highly painful cuttings Dombrovskis was elected also to the second period which shows the great spirit and profound understanding from the nation. Needless to mention that this was a 180 degree variation to the IMF / EU supported Greece path. Since 2012 the Latvian economy has faced a growth rate of 3,0% to 4,5% which brings a podium place almost every year in European scale. Could Finland learn or copy anything of that? The answer is : We could and we should.

Latvian companies are successful in the fields of wood industry, metal industry, medical R&D and food production. Today there is quite stable business society from Finland in Latvia and some 350 Finnish companies are represented in Latvia, most of them located in Riga. At the same time there is less than 20 Latvian companies having activities here in Finland. In the year 2014 Finland’s export to Latvia was some 640 mln euros but Latvian export to Finland only some 360 mln euros. Under the prevailing sanctions and Russian counter sanctions export to Russia has calmed down and there is a certain need for Latvian companies to find new markets. When Latvian president Berzins made a state visit to Finland in January 2015 the business delegation included some 85 members from Latvia. A year before when president Niinistö had a similar state visit to Latvia only three large finnish companies were participating: Fortum, Gasum and Holming. Very few Latvian companies have found their way to Finland and the latest targets are set in food industry. The Latvian investment agency LIIA has decided to open a permanent representative in Helsinki and Ms. Alise Barvika started last year. She has a demanding task of bringing new Latvian exporters to Finnish markets with the current focus on

groceries.

In early 90’s the first large Finnish investments in Latvia were made by State owned companies, like Enso-Gutzeit (later Stora-Enso), NesteOil and Sonera. At the end of 90’s and around Millenium Latvia attracted more medium size and small companies and such branches like construction, real estate, banking, insurance, logistics and transport. Since 2002 the two large food retailers have entered to the market. First Kesko Group made strong efforts to create a chain followed by S-Group since 2007.

The activities of Finnish companies are rather stable in Latvia and most of the companies acting in Latvian market have already been there more than 10 years. This does not mean that there is not living space for new entries; on the contrary. Several new Finnish SME’s should enter to the market and benefit of local competitive advantages. Instead of transferring production to Far East one may found much closer such business environment that makes it worth considering. Local salaries, premises and taxation are competitive and professional and motivated employees available. Latvia may offer also three separate economic-zones which provide taxation benefits for new entries to Latvia.

Summary: The business relations between Latvia and Finland are excellent and the two minor European nations living on the cost of Baltic See have many things in common both geopolitically in the past, but more economically in the future. Mentally it is easy to co-operate with Latvians and the physical distance is small as Riga is closer to Helsinki than Oulu or Stockholm.