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 Latvia's wood industry faces challenges
[Feb  2, 2024]

Timber production and wood processing are key contributors to Latvia's economic output, as well as providing thousands of jobs. However, the wood sector currently faces some challenging times, reports Latvian Radio.
The forestry sector, which has so far successfully proven itself as a major exporter, is currently facing many challenges. Demand for wood has fallen, so the prices and profits of businesses have also decreased.

According to recent Eurostat figures, forestry accounts for 1.5% of Latvian GDP and provides more than 17,000 jobs. More than half (53%) of Latvia's surface area is forest. You can find extensive data about the forestry sector at the Statistics Latvia website.

Last week, at a wood industry conference, businesses discussed the further development and introduction of innovations in the industry, which would allow for the creation of products with higher added value instead of relying only on supplying raw materials.

Agnese Puķe, an economist at the Bank of Latvia, believes that the export portfolio of Latvian wood products has so far been dominated by products of low complexity. Since wood resources will decrease in the future, we must try to use them more wisely and create added value, she suggests.

"Until now, more politicians and economists talked about the need for high-added-value products and knowledge-intensive jobs, which in general is empty talk, because there are no big consequences from the speeches. And there is a completely different weight when the manufacturers themselves talk about it and do it, that they are moving in the direction of higher value-added products and are also ready for these challenges, because of course, in any cycle of innovation, it is not a short-term one, it involves many years effort and also risk, and it's hard work, but a big thank you to the producers for being ready to go in this direction," said Puķe.

Art¨±rs But¨¡ns, the executive director of the Latvian Association of Wood Processing Entrepreneurs and Exporters, believes that the forestry industry has successfully developed since Latvia's independence, new markets have been found after Latvia's accession to the European Union, and now it's time to take the next steps.

"We have used the time after the crisis in 2008 to invest in technological development and infrastructure, and now the moment should have come when we could really start going into more complex products," said Art¨±rs But¨¡ns. "This is, of course, a risk, and it is a big investment, it is the big companies that are able to do it. Of course, there is also very important support, which maybe comes from state or European funds and the like. If we think more seriously about the development of wood science, about those products that could also replace fossil resources in the world at different levels, we must understand that it will take some time, because the development of such products usually takes from 5 to 15 years."

One of the leading wood processing companies in Latvia is Stiga RM, which manages more than 10,000 hectares of forest. The owner of the company, Andris Ramoliņš, says that the company is currently building its third factory in Tukums and it will produce products with high added value: "The more we can do with each log, each product, the more expensive it becomes. The more expensive it becomes, the further we can sell it to export and we have no dependence on supply chains, logistics costs and so on, so we can sell our high-quality products in Australia, Japan, America, Canada."

Andris Ramoliņš emphasizes that the state should continue its support program for export-oriented companies, but with the introduction of automation and digitization, the number of jobs will not increase ¨C instead, wages should be increased. Also, those who have been working illegally since the 2008 crisis should be helped to return to the labor market from the shadow economy.

"Some kind of amnesty should be made and these people should be returned to the legal labor market so that we can continue to develop production in Latvia. And I believe that Latvia can become a manufacturing powerhouse," says Andris Ramoliņš.

"Of course, one more thing is very important. What is needed is what the Ministry of Economy has envisaged, a green corridor that would prevent one or two individuals, say, from blocking the construction of a factory. In Latvia, we have a lot of homesteads and it is very difficult to find a place for an industrial area where we can build, because everyone says ¨C we need jobs, factories, but just not here."

The wood industry conference will be held every year and will continue to discuss how to promote faster industrial development in the forestry sector.