RIGA - A forest is much more than a collection of trees. It is an ongoing dynamic system that lives, breathes, grows but, ultimately, is also capable of dying. Trees germinate, surge into growth, compete with each other for water, nutrition and light. The value of Latvian woodlands is much more than lumber and other forest industry products that are making a significant contribution to the national economy. Trees are a pivotal part of the local ecosystem that play an important part in the CO2 cycle, control air pollution, cool the environment and protect groundwater supplies. Forests also contribute to the development of the local nature tourism industry - more than a quarter of tourists visiting the country every year are using the country tourism routes and nature trails. Hunting, an extremely popular local pastime, is also drawing large tourist crowds, particularly from Russia and the CIS.
Forests are an important composite of Latvia's past - they provided the ancient Couronians, Latgallians, Selonians and Semigallians and Livonians (the five Baltic tribes that inhabited Latvia since the Ice Age glaciers melted) with shelter, hunting grounds and firewood. Woodlands are essential for the country's present 's the forest industry contributes a significant share in the GDP composition (7.5 percent of GDP in the pre-crisis years) and accounts for a large portion of exports (according to LETA, 1.2 million cubic meters of timber alone were exported between January and July 2009).
Finally, forests will be playing an important role in the nation's future, as new markets are emerging for biomass energy projects in the country. The scientists of the Latvian Laboratory of the Forest Environment are currently conducting research of the production of forest biofuel (also known as agrofuel), which can become one of the important elements in creating a cluster of value-added industries in the country going forward. Since biofuels are increasingly used worldwide as one of the most effective ways of reducing emissions of greenhouse gases, Latvia is well poised to benefit from its scientific expertise in this area. From the investment perspective, as the development of Latvian wood product manufacturing, using wood from Latvian forests has been a major industrial success story in the past years; the sector is likely to attract fresh FDI flows as soon as the situation on the global markets stabilizes.
Currently forests cover almost 3 million hectares, or 42 percent, of Latvia's total land area (for comparison, only16 percent of Scotland and 7 percent of the United Kingdom is covered by forest). According to the statistics provided by the national stock company 'Latvia's State Forests,' the areas covered by trees vary significantly throughout the country - from approximately 30 percent in Dobele, Jelgava, Preili and Rezekne districts to more than 60 percent in Ventspils district. State-owned forests (including the national parks and protected areas) cover 50 percent, privately owned forests 43 percent and forests of other ownership take up 7 percent of the total area. The main forest tree species are pine, birch, spruce, aspen and oak. Since the climate in the Baltic states is temperate (owing to the influence from the Baltic sea), the trees grow much slower in Latvia than in Western Europe, on average. As a result, they for the most part are of better commercial quality than, for instance, Scottish or Italian trees, and face sustained demand on the international timber market.
The forests in Latvia are divided into three categories according to their economic, or ecological importance. The first class woodland (national parks and state reserves) takes up less than 20 percent of the total forest area and is protected by the state. Restricted management forest falls under the second category and comprises protected landscape areas and green zones. Exploitable forests can be used for commercial purposes and take up the largest portion of the woodland territory.
In the 1980s state forests covered over 1.5 million hectares. This number fell significantly by 2009, when a large portion of the woodlands went into private hands. During the land reform that began in 1993 over 1 million hectares of land could be privatized (258,000 applications were submitted). Development of the best practices of growing, harvesting and management of woodlands is an ongoing process, and since the beginning of privatization Latvian forest owners have been successful in overcoming a number of challenges including limited experience in forest management and lack of sustainable forest development methods.
The forest is Latvia's national treasure and the country was successful in developing a significant local wood products industry. Local companies manufacture products ranging from doors to fine furniture, from handcrafted chess boards to unique wooden clocks, and from charcoal to plywood. A large portion of the products are exported, however the domestic consumer is gladly purchasing the Latvian-made wood products as well. Latvia uses a large amount of timber, boards, furniture and other domestically produced wood items each year, and this tendency is forecast to increase going forward.
The ongoing economic crisis has significantly diminished the purchasing capacity of the Baltic shoppers, and against this background the opportunity to buy quality Latvian furniture at a fraction of European prices is very appealing. Financial hardships triggered a significant shift in customer preferences that might ultimately translate into an increased demand for domestically-produced items. If during the years of economic abundance 67 percent of Baltic shoppers were willing to buy the 'status' furniture that they classified as 'expensive,' then now, up to 75 percent of the customers will choose 'quality at a reasonable price.'
The wood industry is one of the more robustly developing sectors of the Latvian economy. It is also believed to be among the first ones to recover from the effect of the global financial crisis. The pre-crisis levels of wood product exports lead to believe that after stabilization of the Baltic economies the industry will be developed even further. On average, exports of the wood industry products constitutes about one fourth of the country's total export volumes. Although the production of softwood dominates the industry, there is a significant amount of value-added production taking place in Latvia. According to statistics at the state newspaper Latvijas Vestnesis, two thirds of industry output consists of value-added items, while one fourth is pulpwood and firewood. Some of the market leaders manufacturing wood products are Latvijas Finieris, Baltijas Mezu Eksports, Incukalns Timber and Swedwood Latvia.
Strong sustainable demand for wood and timber products on the domestic market has been normally driven by the construction boom. As recently as the last quarter of 2007, the construction sector in Latvia was still on the rise. Since the building output in Latvia fell by over 30 percent year-on-year in the second quarter of 2009, demand for plywood, fireboard and timber panels followed suit. As the industry is subject to global purchasing power fluctuations, export volumes have been falling as well. This forced the restructuring and optimization of a number of businesses, in particular sawmills.
Wood and timber businesses can have a number of adverse environmental impacts, including noise pollution, air emissions and land contamination. The universal sign of the challenging economic times is that businessmen are forced to cut expenses dramatically and economize on the processes that are not essential to the survival of the enterprise. Significant investments should be made by Latvian businesses to ensure the safe and efficient utilization of the forest resources. Only the firm commitment to environmentally safe manufacturing technologies can ensure the sustainability of the country's forest resources. The good news is that there is actually more forest covering Latvia now than in the beginning of the last century, giving hope that Latvia's role as a producer of wood products will become even more pronounced in the future.