Latvia may become gateway to EU markets for export from Azerbaijan - Secretary of State
Trend's exclusive interview with the Secretary of State of the Ministry of Foreign Affairs of the Republic of Latvia Andris Pelšs
Results of economic cooperation
I can note with satisfaction that trade contacts between Latvia and Azerbaijan are evolving successfully, and the interest of businesses is increasing. In 2020, when the total turnover of trade in goods between the two countries increased by 2.4%, regardless of the COVID-19 pandemic, also the statistics for bilateral trade in goods continue an upward trend in the first nine months of 2021, with an increase of 1.5%.
Latvia’s main exports are foodstuffs, pharmaceutical products and electrical appliances. Imports from Azerbaijan constitute mainly steel and plastic products. Manufacturers are actively seeking, including with support from the embassies, to expand and diversify the offer of goods in trading networks and enable customers to explore and enjoy products originating from both countries.
As I have mentioned, the scale of our cooperation with Azerbaijan in terms of trade in goods reaches beyond the pre-pandemic level. Regrettably, the situation in trade in services is not that upward looking. Figures are falling behind the pre-pandemic level. This can be explained by the fact that our trade in services is mainly related to transportation and passenger travel, namely, the tourism sector, which is going through hard times under the current circumstances.
However, as early as in April 2022, our national airline Air Baltic is planning to resume direct flights between Riga and Baku. I am certain that it will give a positive impetus to the development of mutual business contacts and also to the revival the tourist flow. It must be noted that trade of goods or cooperation in transport sector are not the only areas where we see potential for mutually beneficial cooperation with Azerbaijan.
For instance, we wish to move ahead and expand cooperation in the implementation of joint cultural, educational and research projects. In particular, I would like to highlight cooperation in education: about 170 Azerbaijani students are enrolled at Latvia’s universities, but we’d be happy to see more young people from Azerbaijan at our higher education institutions. Every year, the Latvian Government grants a definite number of scholarships for studies in Latvia and participation in international summer schools to students and researchers from Azerbaijan.
Opportunities in transport sector
Azerbaijan is an important cooperation partner to Latvia in the transport and logistics sector in the Transcaucasian region. Our transport experts see the potential for developing transit freight transport to and from Central Asian countries through Azerbaijan, where we could become partners in multi-modal transport connections between Asia, the countries on the Black Sea and Northern Europe. There is a potential for Latvia to become a gateway to European Union markets for export from Azerbaijan. Accordingly, we offer to Azerbaijani businesses not only transportation of goods through our ports but also their storage, processing and finishing and possibilities for further distribution in Northern Europe.
Another promising area of cooperation is air freight of goods. The Riga International Airport in cooperation with local freight agents can ensure the distribution of air cargo across the Baltic States and Scandinavia, as well as offering the Azerbaijani side to develop Eurasian transportation.
Prospects for collaboration in the sphere of renewable energy sources
Latvia shares the pan-European ambition of reducing harmful emissions and reaching a carbon-neutral macroeconomic output by 2050. Establishing a functional, socially-oriented and free-market-based economy with net-zero greenhouse gas emissions is, indeed, the main objective, the heart and soul of the European Green Deal and aligned with the EU’s commitment to global climate action under the Paris Agreement. Latvia is well situated to achieve these goals in an efficient, transparent and socially inclusive manner. The pre-pandemic share of renewable energy sources in the Latvian final consumption amounted to 40.97%, whereas the EU average level equalled to 18.09%. Furthermore, the relevant equivalent ratio for final domestic electricity consumption was 53.40%, steadily remaining above the 50.00% threshold throughout the challenging times of the first and second Covid-19 pandemic waves. Latvian energy sector shows resilience, flexibility and rational market orientation, which enabled a stable, balanced and sustainable trajectory for its development in line with the broader EU de-carbonization context.
The role of natural gas in the Latvian domestic energy mix had been decreasing over the last decade due to market, technological and regional factors. The main source of renewable energy in Latvia is biomass, followed by energy generated by hydroelectric plants. Ensuring investments in sustainable energy capacities, notably wind- and solar-based generation, are perceived as a strategic priority, hence the currently conducted legislative and administrative work, related to revising the existing legal framework in a manner ensuring a transparent, open and competitive business environment in the relevant rapidly developing energy markets.
Latvia sees cooperation with Azerbaijan in the areas of research and development, knowledge transfer and technological exchange as well as solar installation development as particularly positive. We welcome international investors to expand their operations to and in Latvia as the domestic market has at least 22-24% of imported natural gas to be replaced by local renewables-based generation capacities, thus presenting a unique opportunity to undertake financial and operational business endeavours and presenting lucrative profit-generation opportunities in rapidly emerging sustainable industries.
Investment opportunities
Regrettably, the accumulated direct Azerbaijani investment in Latvia decreased by 23.5% in the second quarter of 2021 as compared to the investment amount at the end of 2020. Consequently, we would welcome investments in any segment of economy. It is noteworthy that the ICT sector has evolved into the fastest-growing field of export in Latvia. Priority vectors of cooperation offered by Latvia in the ICT sector brings to the fore the products and solutions of cross-sectoral cooperation – bioeconomy, biomedicine, smart materials and photonics, as well as smart energy.
In our bilateral relations business opportunities and its development play a significant role. Therefore, if Latvian business community will indicate its interest to expand their operations in Azerbaijan, Latvian Embassy in Baku will assist them where possible.
Future contacts
I would like to note that a regular high-level political dialogue is being maintained between Latvia and Azerbaijan, which is a vital element in bilateral relations. The high-level meetings scheduled for the very near future is the visit to Riga by the Speaker of the National Assembly of Azerbaijan Sahiba Gafarova early next year, and the visit to Baku by the Latvian Minister for Defence Artis Pabriks. In addition, next year, Riga is to host a meeting of the Intergovernmental Commission for economic, industrial, scientific and technical cooperation, which is also an essential government-level instrument for cooperation between the two countries.
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