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Sunday 23.10.2016 | Name days: Daina, Dainida, Dainis

Economic Diary of Latvia. Big economic restructuring

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe meeting of the Council of Ministers of the Organization for Economic Cooperation and Development was held in Paris this week. This was only the second time Latvia has ever participated in this meeting. Foreign Minister Edgars Rinkevics was Latvia’s official representative. He especially mentioned that Latvia had originally wanted to join this organization last year.

The minister mentioned this in his conversation with OECD secretary-general Angel Gurria. Rinkevics said Latvia could potentially finish the process of technical talks this year and become a fully-fledged member of OECD in 2016.

Gurria mentioned Latvia’s progress in joining this organization and noted that it is necessary to secure more effective and practical realization of principles of Law on the Management of the Company and Capital Shares of Public Figures, which was adopted by the Latvian parliament in 2014. Adoption of those principles, according to him, will significantly improve management norms in Latvian state companies to those provided by OECD.

He also noted the necessity to improve transparency in the field of information exchange, especially considering the rapid pace of development of international standards in recent years.

The meeting was held in Paris on 3 – 4 June. Officials present at the meeting discussed matters of investments for long-term growth and creation of jobs.

The meeting of OECD ministers is held once a year. This year’s meeting was the second one for Latvia.

One step back, two steps forward

While the OECD meeting was busy solving global problems, a global event of local proportions took place in Latvia: Russia established a temporary embargo on Latvian fish products. China, on the other hand, opened its doors for Latvian fish products.

The Certification and Accreditation Administration Peoples Republic of China has published a list of 11 Latvian fish processing companies that are allowed to export their goods to China.

The list includes Brīvais vilnis, Gamma-A, Līcis-93 Ģipkas cehs, Līcis-93 Kolkas cehs, Karavela, Dorado, Piejūra, Sabiedrība IMS, Saiva ANNO 1949, Saldus gaļas kombināts and Unda.

This result was possible because of close and constructive cooperation of Latvian embassy in China, Food and Veterinary Service and Foreign Ministry, as noted by the institution.

Meanwhile, Latvian Food and Veterinary Service has received an official notification from Rosselhoznadzor about the establishment of a temporary embargo on all fish products coming from Latvia. This embargo also applies to Estonian companies. The reason behind this measure are systematic breaches uncovered by inspectors of Rosselhozadzor. Most companies affected by the embargo are canned sprat producers.

President of Latvian Union of the Fishing Industry Didzis Smits had previously said that an embargo on fish products in Russia would put many companies out of business and many more people out of jobs.

He noted that Latvian fish producers export around 50% of their products to Russia. The total worth of those products reaches nearly 100 million annually. There are 20 companies in Latvia that produce canned sprats. Their market share in Latvia is considerable. Some of them will have to halt production and lay off employees due to the Russian embargo. Some companies may not even recover.

The good news is now it is known which companies will not go bankrupt, which is mostly thanks to the open export road to China.

What will happen to transit?

All Latvian ports are set to experience a global restructuring of all processes. The sanctions and currnet political situation only serve to speed up the re-orienting of Russian cargoes from Latvian ports to ports in St. Petersburg and Leningrad Oblast. The volume of traditional Russian cargoes – oil and coal – continues to gradually decrease in Latvia.

This is happening not just because the sanction war: Russia is actively developing its ports. Owners of Russian cargoes now find it more beneficial to use services provided by Russian ports, which have become cheaper than services provided by Latvian ports.

Latvians now have to search for new cargoes to replace rock coal and oil. Nevertheless, Latvia will likely retain access to oil cargoes thanks to Belarus. Nevertheless, this direction will not resolve the general problem for the country’s transit infrastructure. Latvian ports need cargoes with high added value – containers, transports, non-standard cargoes. According to Latvian Transport Minister Anrijs Matiss, attraction of such cargoes requires from the state to build a multi-modal terminal (one that combines connectivity with railway, roads and the port).

As previously reported – cargo turnover of Latvian ports had reduced by 3.9% or 26.3 million tons in April.

There is some good news there as well: there was an international conference in Tashkent titled ‘Transport corridor Uzbekistan – Latvia – EU countries’. How does that affect Latvia?

Because of the distance between Uzbekistan to different forms of transport communication and lack of access to ports, export goods are carried through other countries, which negatively affects their end price and competitiveness. In order to maintain economic growth in Uzbekistan at 8%, experts believe cargo turnover activity has to increase 4.4 times by 2030 and the share of investments in this industry should grow from 3.35% to 4.6% of GDP. In order to do this, Uzbekistan has to increase its cargo transport to the EU through Latvia five times.


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