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Resurgent Riga Port risks missing the boat

  • 2004-07-28
  • By Michelle McGagh
RIGA - On the basis of results for the first six months of the year, Riga boasts the fastest growing port in the Baltics. Yet the harbor might have recently missed a finite opportunity to benefit from the increasing cargo transit when a key part of its expansion plans was junked by city residents, politicians and rival ports.

Earlier this month the Riga City Council voted down two construction projects to expand Riga Port's oil-loading capacity in the Sarkandaugava region. Residents of Kundzinsala Island, where the facilities would have been built, picketed outside City Hall, and as a result council members rejected the investment projects, despite support from Gundars Bojars, city mayor and chairman of the port.
"An immediate inflow of dollars does not always mean development," council member Dainis Ivans said in defense of the decision.
Bojars, for his part, chided deputies, saying they needed "to think five to 10 years ahead, and not just to the next elections." As to the environmental concerns, in some cities "oil smelled like lilies of the valley," he commented.
The vote was crucial since, as Riga Port general manager Leonid Loginov insists, the harbor desperately needs to increase its capacity if it is to reach a higher quantitative and qualitative level of development.
The obstacles, however, are proving to be more formidable than investor interest.
"If it weren't for political intrigue, Riga would be competing not only with Ventspils, but with Tallinn," Loginov told the Biznes & Baltija newspaper last week.
Specifically, when asked if Venstpils and its port chairman, Aivars Lembergs, had a hand in quashing Riga Port's ambitions, Loginov said, "Not only a hand, but feet, head and other body parts."
No doubt, the transit business can be cutthroat in the Baltics, but particularly in Latvia. If cargo flows in Estonia and Lithuania are concentrated in one port, then in Latvia there are two large ports and a medium-size one vying for much of the same business.
Still, on the surface it would seem there is enough business for everyone. Riga Port moved 11,628 million tons of cargo in the first half of the year, up 11 percent from the same period last year, or almost as much as the harbor handled for the entirety of 1999.
Port managers have strengthened Riga Free Port's position in the worldwide shipping community by extended its shipping lines to as far away as the U.S.A. and South America and opening representative offices throughout the world. The latest was recently opened in Bremen, Germany.
In April, Bojars visited the United States, where he helped give presentations on Riga Port, and earlier that same month he and President Vaira Vike-Freiberga traveled to China to promote Latvia as a reliable partner for the country that could, according to some estimates, become the European Union's largest trading partner by the end of the decade. Talk of reviving the Old Silk Road - with Riga Port acting as a crucial hub - has buzzed around the Latvian capital.
The Council of Latvian Ports has devised a development program for Riga Port that, if carried out, would turn it into the country's largest port by 2013.
The program, which is part of a 1 billion lat (1.5 billion euro) plan for all of Latvia's ports and must be approved by the City Council, provides for three main development thrusts: widening the navigation channel, rebuilding the rail system and improving surrounding roads.
Widening of the channels will allow large Panamax vessels, carrying general cargoes, to access the port. Bojars was quoted as saying, "Riga may have a total annual turnover of 29.8 million tons, with the biggest growth foreseen for liquid and general cargo types."
But the plans don't end there. Dainis Liepins, deputy chairman of the port and adviser to the Transport Ministry, says, "We want to develop a place for a new city center, including offices, residential buildings and social projects such as theaters."
But massive investments are needed if the port's optimistic cargo targets are to be met. And despite the recent problem with cruise-ship companies over a proposed price increase in harbor fees, Riga Port has been more accommodating to operators, offering discount tariffs to those who can guarantee a certain volume of cargo for handling. Management hopes this strategy will help it attract more operators (currently there are 36).
"Riga has a lot to offer - a good location in relation to Russia, good services, office possibilities and an understanding of Russian business," says Liepins. "China has big potential to attract container goods, and we would provide them with a new connection point. Similarly with the U.S.A., we are a middle point to Russia."
But neither the competition nor politics is likely to vanish.
Frustrated with the City Council, Loginov last week invited Deputy Prime Minister Ainars Slesers, who is also transport minister, on a tour of the port's facilities to show the government's number one investment official what the port needed.
Slesers made it clear whose side he was on.
"One gets the feeling that society doesn't understand what an enormous role Riga plays in the Latvian economy. If we continue to hang on to every tree and ruin then we'll lose hundreds of million of lats," he said.