Although Latvia is a successful country in Northern Europe, some of the country’s residents believe that all of Latvia’s export depends on Russia and that salvation lies in small wages. Big Event representatives offer their look on what is true.
How big is the importance of exports to Russia for Latvia’s economy?
In spite of ruling myths, it turns out that exports of goods to Russia, according to data from the Central Statistical Bureau of Latvia, does not exceed one-tenth of total exports (10.6% in 2010; 11.4% in 2012; 8% in 2015). As a comparison – in 1993, exports to the big eastern neighour reached 30%. What is particularly interesting that the majority of exports consisted of alcohol, Big Event representatives say.
«Russia and CIS countries do have a major role in the field of railway transports. Transports are dominated by cargoes headed from Latvia and Baltics to EU member states. Russia is the largest partner when it comes to railway transports,» – admits Sonora board member Uldis Batarags.
He explains that the reason for this is simple – Russia is not just a destination for certain cargoes, it is also a doorway to Central Asia and even China. This region is considered as one of the most interesting to search for cooperation partners.
«Central Asia has great potential,» – Batarags says. He adds that many businessmen are afraid of starting cooperation with countries of this region, as it has its own specific rules.
Will the fishery industry die without sprats?
«If problems surface with a neighbouring country, industries and businesses that are usually oriented solely towards the Russian market and do not consider alternatives suffer the most. For example, the majority of fish product processing companies producing sprats view the situation as dramatic, as closure of the Russian market in 2014 has reduced opportunities to trade with Belarus and Kazakhstan. Although fish processing companies are trying to reorient their goods for other markets, it is happening too slowly,» – Big Event representatives say.
Liga Mengelsone, Director of Latvian Employers’ Confederation, admits that the food industry has begun slowly adapting to the new situation by varying up goods and services and diversifying markets. The expert believes the main problem is that the food processing industry uses outdated technologies and high proportion of manual labour.
How big is the advantage of low wages?
Latvia’s income level continues gradually growing. Over the last twenty years the average wage in the country has grown seven times – from EUR 86 in 1994 to EUR 603 in 2015.
«It is bad news for industries with low productivity and low wages. Less and less people want to pack sprats by manually nowadays. This is why the idea of importing low-qualified labourers from foreign countries is heard more and more often. This is not acceptable. Sprat packaging process should be automated,» – admits Bank of Latvia economist Oleg Krasnopjorovs.
He said investments in production technologies are important. By gradually lowing low wage advantages, Latvia’s national economy will focus on high value added industries, which requires investments and innovations, says the economist. Kaija brand owner Karavela is a great example for the food industry, as the company has performed production industrialization and creation of more competitive products for the western market.
The ‘Forum. Import. Development’ forum will discuss the topic of how recent geopolitical shocks change the global business environment.