RIGA - Latvia's chemical and pharmaceutical industry is one of the cornerstones of the country's competitive advantage in the global marketplace. The industry, comprising of firms that produce industrial chemicals as well as pharmaceuticals, is central to the economy of this Baltic republic. Its importance has recently been reaffirmed by the decision of the Latvian Cabinet of Ministers to include the chemical and pharmaceutical industry on the list of priority sectors that are essential for economic development of the country. Even though the definition of 'priority industries' has received mixed reviews from regional experts and mass media, sustainable growth within scientifically advanced value-added fields will have a positive effect on the overall economic development of the country.
Latvia has historically had a strong research, development and manufacturing base in sophisticated chemical and pharmaceutical products. The traditions of the Latvian pharmaceutical industry reach back with origins that can be traced as far back as 1542. Currently, the country produces and exports a diverse array of pharmaceuticals and chemical goods, from unique anti-influenza medicine to petrochemicals to household chemicals and paints. The core export markets are Latvia's Baltic neighbors Lithuania and Estonia, and Russia, Denmark, Germany, Sweden and the Netherlands. According to the Central Statistical Bureau of Latvia, last year pharmaceutical products took up the lion's share of the export pie (32.9 percent), followed by plastics (16.4 percent), glass fibre (9.9 percent), perfumery and cosmetics (5.3 percent), paints and varnishes (6 percent) as well as organic chemical compounds (3.6 percent).
However, Latvian chemical and pharmaceutical companies have to operate in an increasingly challenging and complex environment. Since the country joined the European Union, manufacturers are under intensifying pressure to ensure regulatory compliance with EU norms and regulations. In line with the global development of the sector, they increasingly have to address environmental issues and focus on specific customer requirements. Sharp competition from the makers of brand-name drugs, as well as their generic counterparts in the developing countries, is fostering growing complexity in the product environment and necessitates improved coordination across the entire manufacturing process. The difficult economic situation in the Baltic states, and the resulting talent outflow tendencies, make it difficult for the local market players to identify and retain 'the best and the brightest' in the job field.
Notwithstanding the temporary challenges that emerged largely as a result of the global financial crisis, many Latvian chemical and pharmaceutical companies have been showing strong market performance domestically and abroad. Product development capability is just one of the critical determining factors in the high level of export involvement of the Baltic country. Latvia's favorable geographic location, established business ties within the Eastern as well as Western markets and the sector-adequate legislative base contribute towards establishing a sustainable competitive advantage in the modern marketplace.
The Association of the Latvian Chemical and Pharmaceutical Industry (LAKIFA) is one of the most influential industry trade groups in the country. Latvian enterprises recognize the need to put forward the united position on industry-related issues that are supported by local, regional and pan-European activities. As stated on the group's Web page, the Association participates in development of legislation through various advisory councils and task groups, or by involvement in direct dialogue with responsible ministries. The Association also represents Latvian chemical businesses throughout the European Union. Participation in the leading European chemical and pharmaceutical industry networks and groups provides the Association with the information framework necessary to successfully operate in the European marketplace. This level of LAKIFA's international activity represents a sizeable increase over the past ten years and gives an opportunity to effectively formulate opinions and defend interests of Latvian companies at the European level.
Chemical production in Latvia currently is one of the largest manufacturing industries exhibiting strong growth rates within the manufacturing sector. It accounts for approximately 8 percent of the total value added of manufacturing and comprises two core segments - production of raw materials and part-processed products as well as manufacturing of paints and industrial and household chemicals for the domestic and regional markets. Latvia has been traditionally successful in establishing a solid scientific base that is necessary for the sector development going forward. RTU Institute of Inorganic Chemistry, the Institute of Organic Synthesis and The Institute of Polymer Mechanics are just three examples of the research bodies that are creatively moving the industry in a positive direction.
The two firms that stand out on the Latvian pharmaceutical market are Olainfarm and Grindex. Joint-stock company Olainfarm (exporting approximately 80 percent of production output) is one of the largest companies in the Baltic states. It has over 30 years of experience producing medicines, active pharmaceutical ingredients and chemical substances. The company boasts modern international technologies and is certified in compliance with the requirements of the European Good Manufacturing Practice (GMP), U.S. inspection standards (Food and Drug Administration, FDA) and the Environmental Management Standard ISO 14001:2004.
According to information issued by the company, the annual production volume at Olainfarm is approximately 1 billion units annually, whereas sales volumes are growing at the rate of approximately 15 percent annually. The company has launched a unique range of medicines including Fenkarol (antihistamine action), Remantadin (strong anti-influenza activity), Furamag (antibacterial), Neiromidin (treatment of nerve conditions), Etacizin (an anti-arrhythmic drug), and Noofen (anxiety-reducing). The company has been successful in establishing representative offices in Russia, Uzbekistan, Belarus and Lithuania.
Grindex, another leading pharmaceutical holding company in the Baltic states, opened its production facilities in 1946. Currently the firm is exporting to over 40 countries globally, and has representative offices and agencies in 13 countries. Grindex was the first pharmaceutical manufacturer in Latvia to have received the GMP certificate issued by the State Pharmaceutical Agency and arguably is among the most socially responsible companies in the Baltic states.
However, no story on the chemical industry in Latvia would be complete without the mention of Dzintars, which is one of the oldest Baltic companies manufacturing perfumery and biocosmetics. The Dzintars factory was established in 1849 in Riga by the pharmacist G. Briger, and in modern times the company's trademark products are known throughout Latvia and across the border. The extensive product portfolio of Dzintars spans several categories including biocosmetics, perfumes, make-up and cosmetics for young people. In its work, the company utilizes a proactive marketing approach and stringent quality control systems.
In recent years, the Latvian market has been swamped with chemical products manufactured in Russia. As a rule, the price of such goods is considerably lower than those of their European and U.S. counterparts. Russia has also historically been a big export destination for Latvian-produced goods. As a EU member, Latvia has to review the requirements for chemical products sold and consumed within the country. Vitalijs Skrivelis, on behalf of LAKIFA, commented in Bank of Latvia analytical materials that, "Considering the latest tendencies in global economics, it becomes increasingly important to invest in research and development activities in order to develop new products that are interesting, not only for the Russian market, but also on the global level. The major market players dictate increasing quality requirements that the Latvian companies have to be able to match."