RIGA - Like moths to a nightlight, 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.
Last week the Cabinet of Ministers approved an export development plan for 2005 's 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 Sept. 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. fiberboard 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 fiberboard 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 division.
"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 fiber 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 labor 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 three years.
As Dakters explains, "With accession to the EU 's coupled with Latvia's geography of having the European market on the left and the CIS market on the right 's 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 's hence, the importance of the government's manufacturing development program.
"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 's 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 grants.
"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."
