Logistics Outsourcing Opportunities in Baltics

Geographical location, joining the EU in 2004 and the neighborhood with Russia and the CIS have made Latvia one of the most beneficial transit countries in Europe.

Transit industry from year to year, is becoming one of the most dynamic and fastest growing industries in Latvia. Currently, the industry is becoming the main engine of the economy. Latvia due to its geographical location has become an important partner in trade between East and West, North and South.

Latvian transport policy fully meets the requirements of the European Union, our transport network is included in the Trans-European transport network TEN_T. It is widely used EU funds to improve transport infrastructure.

Taking into account the fact that during global recession period the transit industry was not so seriously harmed as others (production, advertizing and sales) we could come to the opinion that transit and logistics industries in Latvia could be an excellent support for new productions and other businesses opening on the Latvian territory.

Our priorities in the transit sphere remain the same - the rapid growth of transit goods, the development of logistics centers, sea ports and airports. In land transport is very important place is the railway. In 2008, the “Latvian Railway” company very quickly - at least by 30% - increased volumes of cargo. In the future, special emphasis will be placed on attracting containerized cargo.

There are also some factors which allows to speak about unified railway system in Latvia, Russia and CIS:

-  Single railway track in Latvia, Russia and CIS

-  Single standard rolling stock

-  Single Security System

-  Single Information System

Today is the active cooperation of the railway and ports, the target in the next three years to reach container flow at Latvian ports till the 5 million TEU. In 2010, it`s planned to start railway route linking Republic of China and the Republic of Latvia directly (Urumchi - Riga). At the same time remains relevant the development of the “Baltic-Transit“ project, which connects one of the free economic zones (Rezekne) with the largest city in Kazakhstan (Almaty), which aims to increase rail traffic flows in the direction of North - South. Both projects are successful competitors of the Trans-Siberian railway route (TSR), nearly halving time of delivery of cargo from Asia to Europe by rail. Significant investments are made for improving the railway infrastructure in order to increase both safety and speed.

As we all could see – The Republic of China is the Country with most developing economics currently and needs for more developed connections between Republic of China and EU is easy to predict. These 2 railway routes could be extremely beneficial support for exporting products from China (especially for North-West regions which are located far from sea) to EU as well as for shipping spare parts for assembling on the EU territory.

Can safely assure all of you that Latvia has been invested a lot of money to ensure that our Country would become even more attractive transit center for rail, sea and road transport, as well as for air traffic.

Of course during the recession period public funding for infrastructure decreased comparing to 2008, but also construction costs were decreased, and that allows to continue all planned projects.

A significant contribution to the development of transit and transport contributes observed in recent years, the rapid spurt in the construction of new roads and repairing of existing ones. Already today 70% excise tax on fuel goes to maintenance and repair of roads. The legislation provides that in closest years funding for roads will increase. This will build the roads in Latvia meeting EU standards. Also, significant investments are made for alleviation of the situation with carriers.

Significant funding for infrastructure Latvia receives from various EU funds. This allows to develop in the coming years an important project Via Baltica, as well as, for example, to plan effectively a new project to build the Moscow highway.

Particular emphasis is placed on inviting of partners to make business in the 4 free economic zones in Latvia - Riga, Ventspils and Liepaja ports, as well as in the Rezekne special economic zone. The peculiarity of the work in free economic zones is that enterprises in these zones are able to obtain significant tax benefits. The law establishes procedures for the application of discounts direct taxes (customs, natural resources, excise and value added tax) and indirect taxes (income tax businesses and property tax), applicable to licensed companies located in the free ports and special economic zones.

Major tax incentives

Capital of the Company, received the status of "free-zone enterprise” are entitled to the following direct and indirect tax benefits:

• 80% - discount on income tax of the enterprise
• 80-100% - discount on property taxes
• 0% VAT rate - the supply of goods and services in the territory of the free
zone for their subsequent export
• Exemption from excise tax on petroleum products supplied or used by the free enterprise zone

The favorable investment environment provides a good basis for the construction of new terminals and facilities.

All the free economic zones in Latvia have developed infrastructure, good communication between themselves and with key strategic sites in Latvia, which allows to work effectively.

Given the EU membership and for many years next door to Russia and the CIS, we can safely argue that an important component of positive cooperation is the human factor - human resources in Latvia has great experience and capabilities of both the European and the markets of Russia and CIS countries.

All this suggests that at present time Latvia is one of the most beneficial areas for transit, as well as for the organization of production and large-scale logistics and distribution centers in all free economic zones as well as for the opening of European offices of companies on it`s territory.