Cover.indd 1
2008.08.28. 19:15:56
Excessive alcohol use is negative to your health! Cover.indd 2
2008.08.28. 19:16:02
Senior business
editor
Business editors Leisure editor
Ingrīda Mičāne Jānis Puriņš Ilgonis Zaļais Bob Traut Jekaterina Streļcova
Contributing writers Dorian Ziedonis Andris Strazds Copy editor Art director Photographer
Dorian Ziedonis Aleksandrs Golovins Vadims Straume Target Studio
Advertisement department Pauline Conjard p.conjard@riganow.magazine.lv Signe Albiņa adv@riganow.magazine.lv
This is a monthly magazine!
The Insider, supplement to RigaNOW! Ganību dambis 24a, Rīga, LV 1005, Latvia Tel. (+371) 738 3499, Fax (+371) 738 3099 e-mail: insiderpr@riganow.magazine.lv All rights reserved. Reproduction in whole or in part is strictly prohibited. The Insider is a registered trademark of “SK Latvia”. Magazine registration number: 0003574031
© SK Latvia Publishing House Reg. Nr. 50003574031 SK Latvia Publishing House is also publisher of:
Editor’s note You hold in your hands the very first issue of The Insider. The Insider has been developed as a long awaited spin-off of the business section of the already popular traveler’s magazine RigaNOW!, which has for several years been informing visitors about entertainment and business opportunities in Latvia. The experience of RigaNOW! along with the expertise that the publishing house has gained through issuing a local finance magazine, in cooperation with the largest Latvian bank leads us to believe that The Insider will become a truly successful business guide for you and your company. Latvia has experienced tremendous growth over the past couple of years – some of it sustainable, some questionable. You as a foreigner might consider taking advantage of this magnificent country which is experiencing a very exciting time of change right now. With GDP growth exceeding 10% annually, you can either sit back and watch, or get involved! When choosing to operate in Latvia, you’ll soon learn that a local bank, to satisfy your needs and serve as a consultant, is of utmost importance. We gathered representatives from the largest banks to find out – what is it that local banks can offer that can’t be found anywhere else! As it turns out, Riga is already the financial centre in the region. Our overview of the tax system in Latvia will help you evaluate the significant differences (even advantages) that the tax legislation brings for the foreign businessman. If you’re looking for a good investment opportunity, take a look at our special report about the Riga Stock Exchange, which belongs to the OMX group, thereby opening to you the window not only on the Latvian market, but also the whole Baltic and Nordic Market. Now that OMX and NASDAQ have announced an agreement to combine both companies, the opportunities are about to expand. When considering entering the local market, you will find it useful to read about industrial parks, which maintain their competitiveness through offering full service at a reasonable price located at the geographic crossroads that join West and East Europe. However, if doing business in Latvia is not yet on your agenda, sit back and read about Bertolt Flick’s experience as president of the leading airline airBaltic. He came to Latvia in 1995 and ended up building one of the most successful regional airlines! And finally enjoy our hunting special – Latvian forests really have a lot to offer! So do enjoy your stay in Riga, the city of opportunities! We hope to see you back soon! Please share your views on this first issue at i.micane@next.magazine.lv Ingrida Mičane Senior business editor
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THE INSIDER
2007.07.12. 13:17:08
Contents
8
24
20 4 6
News
8
Top Story Profiting with Latvian banks
Facts and Comments Is the tiger out of breath?
16 Success Story The sky is the limit
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THE INSIDER
32
20 Real Estate Latvian Parks: A Tool to conquer Russia 22 Taxes It’s better to earn more while paying less taxes
30 Lifestyle Green Food in Latvia 32 Lifestyle Expect the Unexpected: Hunting in Latvian forests
25 Finance Baltic Stock Exchange: Tiger ready to jump!
Issue# | July 007
2007.07.12. 13:17:56
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THE INSIDER
2007.07.12. 13:56:27
NEWS Growth Predicted for the Baltic States
Electricity market in Latvia liberalized
The market for electricity in Latvia has been liberalized, starting from July 1. This makes a great difference for consumers (including households) as they will have the option to choose by themselves the provider of their electricity. Up till now the monopoly Latvenergo has been the provider of electricity in Latvia. In the beginning of July the Public U t i l i t i e s Aigars Kalvītis ComisLatvian prime minister sion issued licences to 12 comp a n i e s that could undertake sales of electricity. Latvian Prime Minister Aigars Kalvītis emphasizes that liberalization of the electricity market shall promote competition in the future, which will bear positive consequences for consumers of electricity. He adds that liberalization of the electricity market is a part of the policy of the European Union, which has to be undertaken by Latvia. At the same time one must take into consideration that the prices of electricity have a tendency to rise and such a rise is expected also in the future. It has already been revealed that the leading company in the metals industry in Latvia, Severstallat, will buy electricity now from Estonian supplier ”Eesti Energia”. A similar pattern will be followed by the embassy of Estonia in Latvia.
“More competition means better prices for consumers”
The dominant real estate company in Finland “Realia Group Oy” has acquired “Ober-Haus Real Estate Advisors”, thereby creating the largest real estate agency in Central and Eastern Europe. The new, enlarged company at the moment employs almost 2,000 people in Finland, Estonia, Latvia, Lithuania, Poland and Ukraine. ”Ober-Haus Real Estate Advisors” plans to focus on development of real estate, says the company’s founder Paul Oberschneider. His company “Hauser-Oberschneider” will continue to build shopping centres in Estonia and is planning to develop new projects for apartment houses in the Baltic States. “Häuser-
Ober-Haus SELLS OUT to the Finns Oberschneider” together with ”Vilniaus Prekyba” will develop a new shopping centre in Parnu. The company also owns four shopping centres in Tallinn. Within the last 12 months “Hauser-Oberschneider” along with its partners ”Citigroup Property Investors” have acquired 18 hectares of land in Vilnius in order to build 2,000 apartments. Oberschneider believes that partnership with ”Realia Group” and its financial shareholders will promote the growth of the company, as well as the penetration into new markets, thereby ensuring that ”Ober-Haus” achieves more than before. The board of ”Ober-Haus” will remain and acquire shares in ”Realia Group”, with the purpose of becoming the dominating real estate services supplier in Scandinavia, Central and Eastern Europe.
Source: LETA and staff writers.
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THE INSIDER
Issue# | July 007
2007.07.12. 13:18:04
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THE INSIDER
2007.07.12. 13:57:08
fActS & commENtS
By Andris Strazds, lecturer at the Stockholm School of Economics in Riga.
Is the tiger out of breath? Why the Latvian economy is overheating
Anatomy of the tiger leap
downpayment of at least 10% of the purchase price and require private borrowers to provide proof of legal income for loans exceeding LVL 12,000 (about EUR 17,000). In addition, stamp duties for real estate purchases have been increased and personal income tax will be levied on sales of private real estate held for a period shorter than 5 years.
The economy of Latvia has shown tremendous growth during last years, in particular, double digit growth rates in both 2005 and 2006 as well as the first quarter of this year. However, the rapid development has mainly been supported by rapidly rising domestic demand. As a result, Expected impact the growth in such industries on the market The measures aimed at reducing as construction, wholesale and retail trade and financial serv- Latvia has experienced tremendous the growth of domestic demand should result in such sectors as ices accounted for a large part growth over the past couple of the total growth. of years - some of it sustainable, financial services, retail trade and construction cooling down and the The growth of domestic desome doubtful. growth rate of the economy going mand reached 30% in 2006 down to single digit levels that are and was too high for the supply side to be able to absorb it. As a result, resulted in the loan to GDP ratio reaching sustainable in the long run. They should two negative effects emerged along with 90% of GDP, which comes close to the also help to balance the economy by the high economic growth. The first is level in developed financial markets such limiting import growth and making doa current account deficit. It has been in- as Germany. Unfortunately, mortgage mestic business people turn their attencreasing recently and both last year and and consumption loans accounted for the tion to export markets again. in the first quarter of 2007 exceeded 20% lion’s share of the recent increase. Given the above, investors should be of GDP, which is clearly not sustainable The above mentioned trends have re- very careful about the real estate secgoing forward. Since 2006 Latvia has sulted in both domestic analysts and in- tor, in particular, residential real estate, also seen domestic demand crowd out ternational rating agencies warning that as prices might go down in the short export demand, clearly a negative trend. the Latvian tiger might be out of breath run. The commercial real estate sector The second negative effect is inflation. and a serious slowdown is inevitable al- might still present some opportunities, however, one should look for a secure Consumer prices have been rising at 6- ready in the near future. rental income stream and not expect an7% annually since 2004, while recently nual yields above 10%. If one looks beinflation has reached 9% and most Policy response economists fear that as a result of the The monetary policy options are limited yond real estate or retail, though, there recent increase in gas tariffs we might as the lats, the national currency of Latvia are still opportunities in many other see double digit figures very soon. And is pegged to euro at a rate of 0.7028 sectors such as tourism, ICT, engineernot only consumer prices have been af- LVL/EUR and fluctuations of only 1% ing, food, transportation or creative fected, also asset prices have skyrock- in each direction from this central rate industries. There are still quite many eted – some sectors of the real estate are allowed. As to the fiscal policy, the businesses owned by individuals who market have seen prices going up more government has been relatively reluctant have built them and are now in their 50s than two times during last two years. to tighten it until very recently. However, or 60s and looking for an exit. Great The rapid rise of domestic demand has after international rating agencies low- opportunities are also often present in mainly been fueled by growth in loan ered their rating outlooks, a legislative smaller towns beyond the greater Riga volume. Last year the loans outstanding package aimed at limiting the growth of area. However, the investors should be to residents (both households and compa- domestic demand was passed. It puts a prepared to put down their money for nies) went up by more than EUR 5 billion. cap on government spending and requires a longer period of time as in the short For an economy of slightly over EUR 15 the credit institutions to be more prudent run the tiger is indeed likely to need to billion that is a huge increase. It has also in their lending practices – to require a regain its breath.
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THE INSIDER
Issue# | July 007
2007.07.12. 13:18:41
©SAD 2007 ©SAD FSBK01-1 2007 FSBK01-
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Telephone/ fax: + 371 77 96 900 THE INSIDER
7
Telephone/ fax: + 371 77 96 900 2007.07.12. 13:18:46
toP StoRY
Many cities around the world compete for the title of financial centre. The existing global financial centres are currently making room for newcomers. Why? According to Capgemini data, the number of High Net Worth Individuals (HNWI) in the Middle East is growing at a 7-8% annual rate. This tendency has given birth to new financial centres like Dubai and Singapore. Eastern Europe too is experiencing an HNWI-boom and the amount of wealth is spiralling higher, which demands the need for a new financial centre. Riga is believed to be the front-runner in this race. Let’s explore!
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THE INSIDER
Issue# | July 007
2007.07.12. 13:18:51
L
atvia has more banks than Sweden, Lithuania and Estonia combined; nonetheless, by no means has quality been sacrificed for quantity. The service you get here is not a halfpenny worse than that in old-line western banks; what is more, the fees will be smaller, as the experts - Sergejs Medvedevs (First Vice-president, JSC Parex Asset Management), Dinārs Kolpakovs – (Board member, Head of Foreign Projects Development Department, Baltic International Bank), Lauris Mencis (International Customer Service Department Director, Hansabanka-Swedbank) and Kristians Pudans (Head of Marketing, Nordea) – unanimously declared at our round table discussion with The Insider. This is a land of 2.4 million people served by 24 officially registered banks. A healthy competition-driven struggle for customers, in combination with deeply rooted traditions defines the way customers are treated – their time is valued more than rubies and comfort, security and confidentiality are taken as a matter of honour. Upon visiting any bank you will be greeted by educated and friendly staff that will offer, in fluent English, Russian or German, a wide range of services. Latvian banks have a proven record of working with non-resident customers, backed by wide experience gathered over the last 15 years, mainly through servicing those of CIS origin (a share of 75%). Already a lion’s share of the capital in the banking sector is foreign. (see Exhibit 1).
Veni, vidi, vici
Can investors profit in Latvia? We asked this from our experts and were not exactly suprised by their response, which was positive. I came, I saw, I stayed – hundreds of foreign investors can attest to this rehashed, famous dictum by Julius Caesar. In spite of the turbulences representative of an economy in transition, Latvia is still appealing for investment. The combined assets of Latvian banks amount to 59.38 billion euros. Evidently, in terms of commercial banking services Riga already is the financial centre
successfully operating in Latvia for several years – Skandinaviska Enskilda Banken, Nordea Bank, Norddeutsche Landesbank, Swedbank, Sampo Bank and others. Scandinavian parent banks have started to form various support functions implementing back office operations, which also hints that Latvian specialists are now being recognized as experts.
What’s here for you
What is it exactly that the Latvian banks have to offer to their customers? We can start a clarification review
The average offered euro rate on deposits in Latvia – 4.55% is almost 30% higher compared
to the European average – 3.5% of the Baltic region and maintains a strong position as leader in specific services, say wire transfers with CIS banks and fund management.
No illusions, and still...
Latvian bankers are realistic and build no castles in the sky. True, global leaders like Citigroup, Barclays Bank and Credit Suisse are still not represented in Latvia. Nevertheless, there are already some pioneers. For instance, French Societe Generale has already joined the game by entering the Latvian market and American GE corporation has recently acquired Baltic Trust Bank. Subsidiaries and branches of respectable western European banks have been
from one of the key banking products – deposits – to explore if Latvia is capable of beating offers of the western banks! Although interest rates in both Europe and Latvia remain quite low, local banks can really surprise. The average offered euro rate on deposits is 4.55%, which is an astonishing 30% higher than the European average of 3.5%, while at the same time the local interest for time deposits is still somewhat low, since banks offer other instruments with more appealing returns. In essence there is more interest for investing in funds. Latvian banks, with their comparatively high interest rates are consequently capturing foreign market share. Take as
Foreign investors own 68.5% of the equity capital of Latvian banks (581 mil. euros) country
Estonia
Denmark
Germany
Sweden
Russia
Iceland
finland
total (million euros)
264.83
80.92
59.39
56.94
33.70
19.23
17.46
% against total equity capital
31.2
9.5
7
6.7
4
2.3
2.1
% against equity capital held by foreigners
45.58
13.93
10.22
9.80
5.80
3.31
3.00
Exhibit 1. Source: LETA, 2007
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THE INSIDER
2007.07.12. 13:18:52
toP StoRY Deposit rates offered by different banks 4.5%
3.8%
3.55%
4.05%
3.5%
4.55%
H an sa ba In nk ter a na tio na B l B al an tic k Eu ro pe av er ag e La tv ia av er ag e
No rd ea
Pa re x
+30%
Growth in number of HNWI (High Net Worth Individuals) according to territories over 2004/2005
Ru s
as t
id
dl
eE
As ia m
Exhibit 2 Source: Capgemini And Merrill Lynch “World Wealth Report 2006”
sia
+9.8% +17.4%
+7.3%
an example Parex Bank successfully filling a niche in the Swedish market, where interest rates are far beneath criticism, according to their own press, who also complain that upon entering the market with an alluring 4.5% per annum, Parex Bank leaves the other banks in the dust (SBAB with 3-3.75%, Danske Bank with 4%). Not bad at all, right?
Real estate – profitable investment
If the investor’s interest goes beyond relatively high deposit rates, another hot investment segment would currently be in real estate. Over the last two years the segment has experienced a 50% per annum growth. This opens up numerous opportunities, depending on how deeply the investor wishes to get involved into the process. All in all there are two ways an investor can go: either to invest in the launch and development of a new construction project taking advantage of Latvian banks’ co-financing offers and low interest rates, or the investor can choose the easy way and invest in real estate funds, whose return over the last few years has been quite significant. Regardless of the final choice, the investor is offered high-quality service, advisory services and specific research upon additional request.
Good co-financing
Assume a Western businessman arrives in Riga with a precise 0
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THE INSIDER
goal of building a hotel. Obviously, he is looking for a partner who would provide co-financing, take the responsibility of conducting market research and support the development of the project. From a pure financing standpoint, a foreign investor needs to keep in mind that the equity and bond markets in Latvia are rather undeveloped (stock market capitalization on July 6, 2007 was 2.31 billion euros). Consequently, banks are the main source of funding for companies, Lauris Mencis explains. In Latvia, nursery financing is secured at 6090% of project value; furthermore, long-term cooperation is offered – the loan is issued for a period of 20-30 years with an average rate of 8% per annum (compared to 13% in Russia and 15% in Western countries). What is more, the partner will also ensure everyday management, say transaction and cash management, to the benefit of the investor.
Real estate funds – an investor’s titbit
If a private Western investor expresses an interest in Latvian banks, he is chasing either the Baltic countries or the CIS states, says Sergejs Medvedevs; the main interest is, however, a unique offer. Real estate funds still remain limited. In Latvia, service and investmentreturn possibilities are offered by Parex Baltic Real Estate Fund and SEB Unibanka Real Estate Fund. Funds allocated in this way are handled by portfolio management, the fund itself is in turn licensed, audited, and subject to investor installment security guarantees from an international expert commission as determined by EU legal regulations. Just this spring (April 13, 2007) a report prepared by Ernst & Young Baltic audit company on Parex Baltic Real Estate Fund was approved. Profit earned for investors by the manager of the fund - Parex Asset Management over the entire period amounted to 105.60%, or 20.15% per annum. How exactly does the fund operate? During the period of fund operation 13 real estate properties were acquired and successfully sold. Consequently, upon liquidation of the fund, the share value more than doubled - from USD 10 to USD 20.55 per share. The overall fund value at liquidation completion exceeded USD 17 million. According to Medvedev, this was the first real estate fund managed by Parex Asset Management. Its magnificent performance is also fortified by the decision of the managment to reinvest about half of the funds in Parex Baltic Real Estate Fund II. At this stage the company manages 3 real estate funds and is planning to offer its customers a whole range of new funds by the end of the year. These funds will invest in real estate projects in Russia and the CIS states. What does it mean from an investors perspective? Go with the real estate boom flow, worry about the development of the project, search for co-financing. The other option is to simply invest in real estate funds and skip the details. Issue# | July 007
2007.07.12. 13:18:54
and services but a full range of service solutions for a business.
Investment funds – Impossible is nothing
There is an increasing popularity also among investment funds offered by Latvian banks – there are endless possibilities available, where an optimal match can be found for every customer’s wants and needs. By now numerous long-term investors have confirmed their plans to place their funds in the Baltic area, with the highest demand coming from conservative German investors whose doubts about the scale and quality of the Latvian market only faded away in the last few years. Figuratively speaking, if an investor with 100,000 euros in his pocket comes in, Latvian banks need little time to contemplate investment options. Almost anything is possible, though as the experts unanimously agreed, the risk-to-return ratio has to be stressed. It all depends on the customer’s appetite, adds Kristians Pudans. Millions of investment fund options structured by fields of activity and regions are available, by region – Central Eastern Europe, North America, and by industry – biotechnology, efunds, etc. These funds can be also complemented by various short-term and long-term savings products, and structured products. If a Finnish customer, for instance, requests information on the opportuni-
Go with the real estate boom flow, worry about the development of the project, search for co-financing. The other option is to simply invest in real estate funds and skip the details. full advisory package
As Dinārs Kolpakovs notes, if the bank defined customer service as a priority and does its “homework” well, understands customer needs, is capable of offering appropriate products and provides professional service, there should be no problems. This means that the bank offers the customer more than
just the range of standard products like opening of accounts, financial services, but also a bank expert’s view of the current situation in the customer’s chosen segment, and possible development directions. Research and extended advisory services are provided upon request. So, a business customer is offered not only standard bank products
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ties to invest in Latvian funds, Mencis adds, the first thing to investigate is the customer’s willingness and readiness to take risks – no matter if it is a Latvian or an American fund. There is a palette covering a wide range of opportunities combined with the manager’s know-how that provides for the possibility of offering diverse soluTHE INSIDER
2007.07.12. 13:19:15
toP to P Sto S StoRY toRY RY tions. As Kolpakovs states, a Baltic International Bank London branch was established with the central purpose of securing convenient access to Baltic area securities for the demanding Western investor. But there are Latvian banks that choose even more “extravagant” headquarters. Take one example – Parex also provides services from Switzerland through its wholly owned Private Anlage Bank. Aside from that, the customer is not forced to work from a single bank’s framework. It may sound unbelievable, but at times banks recommend competitors’ services, Medvedevs admits, when characterizing one of Parex’s services – Open Architecture. It is in essence the case where through a single bank a customer has access not only to that particular bank’s services but also to those offered by the bank’s competitors. Since the customer is knowledgeable and experienced, he knows that no matter how old and stable the bank is, it cannot offer simply the best in all product ranges. Therefore, in the case when, as part of the service, the customer is offered alternative solutions from the pool of competitor banks’ services – which serve as a guarantee of achieving the best suitable result – this is considered an advantage of the bank.
Access to the Russian market – trade finance services
We can consider Latvia’s geographic location and its historical experience in working with CIS states as a crucial advantage of Latvian banks. One of the products that Latvian banks offer on a high-quality level is international trade financing, since a number of banks have offices in Russia and other CIS states that have been operating for
The profit that the fund manager Parex Asset Management earned for its investors during its run was 105.60%, or 20.15% per year.
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THE INSIDER
quite a few years (for example, Baltic International Bank, Parex). For Western exporters it offers a better chance of getting deal guarantees in the high-risk CIS area. As Kolpakovs points out, trade finance expenses are very competitive. For example, the charge for investigation and processing of a query is only 0.5% of the deal amount.
the banks’ boast - High Net Worth Individuals (If you want to feel special)
In the world’s large financial centres, along with the excellent customer service culture that is applied to every customer, the banks serve a very special segment - High Net Worth Individuals. This is a customer who has at least USD 1 million at his disposal and expects service that would be in accordance with his financial status. HNWI financial welfare is forecasted to reach a total of USD 44.6 trillion by 2010 through an average growth of 6% per annum. The trends of the last 5 years have shown that 15% of total assets are invested in real estate and 11% are held as savings. The HNW customer’s status in Latvian banks, as well as in Western credit institutions, guarantees numerous additional services from which the customer’s business benefits. For instance, a customer is offered all standard and advisory services, and a personal financial consultant, or even several, as a bonus. The customer is entitled to all sorts of detailed counselling connected with bank services. Kolpakovs explains what steps should be taken to become a HNW customer. In essence it is exceptionally easy – you just have to fill in the forms in accordance with the bank’s internal regulations. This procedure is very convenient, since a personal banker will assist you in any of the process stages. There is no separate membership fee and as for service fees, they are definitely lower. Latvian VIP customers pay an average of 150 euros per month for the full range of services, which is not a significant fee taking into account additional services, advice and consulting. Issue# | July 007
2007.07.12. 13:19:18
From left: Dinārs Kolpakovs, Kristians Pudans, Sergejs Medvedevs and Lauris Mencis
There is an opportunity of
effective business in the Nordic and Baltic market through use of single stock exchange. Moreover, you don’t have to necessarily come to Latvia to become a customer. The banks offer various solutions. There are options which allow one to process documents and requests electronically, or to arrange for a meeting with the bank’s representative at a foreign location convenient to you (if there is no branch of the bank on location).
Significant previous experience
What is their previous experience in working with foreign investors, especially VIP customers? Obviously, under the conditions of severe competition banks have their own
methods of drawing in customers, including HNW customers. Pudans points out that specific products are offered (financial engineering, commodities markets, trade finance, etc.). He emphasizes that it was the foreign investors, including VIP customers, who expressed interest in sophisticated solutions and since they demand such products from banks, they are obviously offered. Nordea provides VIP services within its Customer program, as well Luxemburg Private Banking services are available via the Latvia branch, though the staff has all the necessary competence and solutions. In Hansabanka, VIP customers are serviced by a
Insider#1.indd 13
dedicated team consisting of 3-4 employees: a personal account manager controlling everyday operations, a personal banker who solves more complicated problems, a specialist dealing with the security portfolio, and a loan officer, if necessary. All of them know the customer’s needs and have the expertise to pick out the most suitable solution. But the main point is that this process design ensures a higher degree of independence and confidentiality, since each of the specialists only deals with a part of all the data. In the majority of banks in Latvia, servicing non-resident customers has historically been one of the strategic dimensions, yet with various degrees of importance to individual bank operations, hence high service levels, Mencis points out. It is worth mentioning that over the last two years those Latvian banks that have been active in servicing nonresidents have rearranged and revised their customer portfolios due to requirements imposed by the regulator (FKTK) and legislative acts. What concerns non-resident servicing, a centralizing trend can be noted which relates to the global multinational company (one of the non-resident segments) and financial resource management. This means that many global regional players experience a new need to open nonresident accounts in countries where they have subsidiaries and carry on active market activities. This in turn is a signal to local banks to further improve customer service to ensure a high quality of available services. Hansabanka offers a full range of bank products and services to non-resident customers (operating accounts, payment cards, remote payment systems, loans, letters of credit, bank guarantees, international trade financing) and customer surplus fund investment management. One can argue that the customer’s interests in the bank are represented in full, which in turn increases the value added to the bank and gives the customer a feeling of confidence and safety. THE INSIDER
2007.07.12. 13:19:32
toP StoRY mergers and Acquisitions – not a foreign term for Latvian Banks
Latvian banks have wide experience in assistance in merger and acquisition deal processing. And, it was not all for nothing since the Latvian economy has been growing at 10% a year for three years in a row now. Good examples of yesterday would be A.S. Watson acquiring Drogas, the Lattelecom management buyout,
to German tax legislation when engaging in any commercial activities in Latvia. The difference arises when a person is engaged in commercial activities in Latvia as a resident and pays taxes here, since the corporate income tax rate in Germany is 25% and in Latvia – only 15%. Bankers point out that the investor can rely on professional legal advisory services on how to effectively exploit tax discounts; moreover, an individual solu-
and Fitch Ratings is to be kept in mind. Latvia is currently ranked A/A-/A2. As can be seen from the table, while the country is ranked A- , there are banks ranked relatively higher (Nordea and Hansabanka for instance), which is explained through their mother banks being Scandinavian, ensuring a higher security level. Thus there are banks whose credit rating is higher than that of Latvia,
Thus there are banks whose credit rating is higher than that of Latvia, which is good news! When there is stability in the banking sector, you can invest and be sure that it’s a safe thing to do. Latvijas Balzams, LEC. According to Mencis’s comments, Hansabanka works on about 2-3 M&A deals on a monthly basis, and the bank also structures the financing solution (i.e. financing deal processing). The interest rate, financing amount-to-deal value ratio and special conditions are of an individual nature and are applied separately to each deal. Management’s commissions tend to fall into the 0.75%-2.0% range of the financing amount. It should be noted that M&A advisory has been pulled out from the service range of the bank and reallocated to a separate legal entity, thus the bank can concentrate exclusively on financing solutions development.
What else? friendly taxes!
Another positive factor speaking in favour of investment in Latvia is definitely worth adding to all the above listed. Tax rates in Latvia are low on both corporate and individual levels. Regarding investment – they are a bargain for non-residents, since the tax system is liberal. If you’re a German residing in Germany, you are subject
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tion is found depending on the country which is good news! When there is of origin. stability in the banking sector, you can invest and be sure that it’s a safe What about risk? thing to do. As the fundamentals of economics tell us, there are different risks – financial, Ambitions balanced with macroeconomic, political, etc. Pudans possibilities reminds us that Latvia is no exception, Stability and steady development and notes that customer risks are the have remained the cornerstone of the crucial matter. Therefore a combined Latvian banking system for the last solution is offered – a full package, in 15 years. Even large scale disasters other words a system capable of cov- like the Russian banking crisis of ering currency and interest rate risks. 1998 have not scared investors away. Mencis in turn reminds us that even To Russia and other CIS countries if the ranking of a local bank drops, Latvia has become a bridge to the it is only the mother bank’s ranking west, but to western entrepreneurs – that matters, since it provides for the a safety platform for operating in the guarantee. The overall credit ranking markets of the CIS countries. This of Latvia as determined by the largest makes Riga the place where crossinternational rating agencies Moody’s border financial processes are setInvestor Service, Standard&Poor’s tled. Just as it is in the case of entrepreneurship coordination centres in Dubai, Luxembourg, Singapore, etc, as an eastern region Riga’s strongest points should be high service standards, flexibility, relatively low costs (long term deposits) and, of course, the diversity of lanLatvia A guages. Add a high level of experHansabanka A1 tise in CIS markets and voila! You Parex Baa3 will now understand that Riga is the place! Nordea Aa1
International Ratings: Moody’s
Issue# | July 007
2007.07.12. 13:19:34
TOP STORY
Scandal started. Is it over? The beginning of July brought unexpected news for four Latvian banks. American Express Bank, which belongs to the American Express company, announced suddenly that it will close correspondent accounts in Parex Bank, Norvik Bank, Aizkraukles Bank and Baltic Trust Bank. One of the reasons mentioned for this move is a change in corporate strategy. However, it is clear that leaving the region is not one of the bank’s intentions, as AE Bank continues its relationship with two of its other correspondent banks – Latvijas Krajbanka and Latvia Business Bank - which are indirectly owned by bankers in Russia. It is somewhat surprising that the relationship has ended with Baltic Trust Bank, as this bank was recently acquired by US-based GE Money. At the moment a considerable level of imbalance can be observed in the banking sector. This is due to long term crediting, as compared to deposits held by the banks. The deposits are quite short-term in comparison to the loans given out.
of Commercial Banks of Latvia, Teodors Tverijons, tells The Insider that the case where all US banks would close their correspondent accounts here seems “completely unbelievable.” However, the Latvian officials should ascertain the reasons behind AE Bank’s actions. At the same time, the director of the prime minister’s office, Maris Riekstins, says that “the dialogue between Latvian and US officials is being held simultaneously through different channels, including diplomatic ones. The government is cooperating with the Committee of Finance and Capital Markets.” The Insider approached Latvia’s main regulator, the Committee of Finance and Capital Markets, where director Uldis
The clients can still use their American Express card to pay for products and services and companies can still accept it as a reliable means of payment. This means that the loans are not covered. There is a common belief that up to now the difference was often covered by non-resident money. However, there are pre-defined limits when it comes to correspondence between active and passive accounts against the holding periods; thus, the money within the accounts coming from CIS countries and Russia most likely is not used to cover long term crediting and is located in correspondent accounts. Still, if the above-mentioned clients are lost, the banks which are on the “black” list might face liquidity problems in the short term. This could be an issue up to the moment when a portion of the balance of the resources need be transferred to the correspondent accounts. Will AE Bank’s decision to close these correspondent accounts be followed by similar decisions from other American banks? The president of the Association
Cerps emphasized: ”It is of utmost importance that the banks in Latvia do correspond to international requirements, thus, it is unfair to claim that the banks or the state as such do not follow any of the outlined rules. The decision taken by particular US banks to close the corresponding accounts in Latvian banks was not made by the US government; it was an action dictated by the principles of business. In practice, some of Latvia’s banks will from now on have fewer partner banks through which they can perform transactions in a particular currency – that is, the US dollar. At the moment Latvian banks possess cooperation partners not only in corresponding American banks, but also (and even more so) in Europe (Germany, Sweden, Finland, Austria, Switzerland, Great Britain, Cyprus, Lithuania, Estonia), Russia and other regions. Through these banks our banks can do transfers in
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dollars. To sum it up, when it comes to bank transactions in dollars, the recently held decision will have no significant impact on Latvian banks. Still, the motivation behind such an action should be thoroughly investigated – each bank can do this individually. The Committee will do the same on a regulatory level; this is being done now. All the available information is being collected.”
American Express cards will not disappear!
Meanwhile, the head of the Department of Payment Cards at Parex Bank, Andris Riekstins, reveals: “Parex Bank will continue cooperation with American Express, thus American Express payment cards will be issued to customers in Latvia, at the same time the number of locations where the card is accepted will continue to grow. The clients can still use their American Express card to pay for products and services and companies can still accept it as a reliable means of payment. I would like to remind [everyone] that the number of American Express cards issued by Parex Bank has grown by 78% this year and the number of companies that accept it has grown by 20%. To quote Peter Wright, vice president of American Express, that Latvia is one of the primary markets in the region, “Parex Bank has been issuing our cards for two years already and during this period it has achieved excellent results, by offering high quality products and attracting loyal customers with high purchasing power to the companies that cooperate with American Express. Parex Bank is an excellent partner and we shall definitely continue cooperating to develop the products and services of American Express, which have been created to satisfy the growing needs of the consumers in Latvia, as well as the retailers.” Hansabanka is not affected by the latest events. The correspondent accounts at Hansabanka are in Deutsche Bank and Citibank.
THE INSIDER
15
2007.07.12. 13:38:02
SuccESS StoRY
AirBaltic is not only the Latvian national carrier, but it’s also the national pride. From a small company operating just a few flights in 2000, the company has expanded to 66 direct routes in 2007. With such tremendous results over the past years, who better to turn to for some business advice than Bertold Flick, CEO and President of airBaltic? When you became president and CEO of airBaltic in 2002, what was the situation in the market and the company? 2002 was an extremely difficult time for most airlines - it was about 6 months after September 11, with a downturn in passenger numbers, a drop in average fares and other problems. However, this was not the beginning of the difficulties for the airline industry; the real problems started much earlier and became apparent in 2001. In 2002 the company was very small, we had 3 jet aircraft, officially operating only 2 and had 3 turboprop Fokker 50s operating to 8 destinations. We had just 220,000 passengers in 2001
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compared to Scandinavian Airlines with their 30 million. We were also their smallest national carrier within the Baltic States. What were your priorities when you started in 2002? We started a number of things at the same time. First of all, we expanded the number of destinations because people wanted to fly direct rather than with connecting flights. The next issue was positioning: initially airBaltic was designed as the ‘businessman’s’ airline to and from the Baltics and obviously until 1995 there were no tourists going from or to the Baltic States. But in 2001 the situation started changing
and this had to be reflected in the pricing, so we lowered prices and we had campaign prices. The next step was to get the unit costs down, the costs per seat-kilometer, and already at the end of 2003 we started to change our fleet by introducing the Boeing 737. How has airBaltic developed over the years, how many routes is airBaltic operating now? Now we have 45 out of Riga and 18 out of Vilnius, but then we have Kaliningrad and Liepaja-Hamburg, LiepajaCopenhagen, so all-in-all we have 66 direct routes. But we’re still a small airline. With 1.5 million passengers last year we still are very small. Issue# | July 007
2007.07.12. 13:19:54
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7
2007.07.12. 13:19:55
How can you comment on such an impressive extension of your eastern destination? In 2002 we were flying to Kiev four times a week with a Fokker 50 and we opened a flight to Moscow 3 times a week with a Fokker 50. Actually in 2002 demand to eastern destinations as well as to western destinations was extremely low. Within the past 2 - 3 years, we see the demand for eastern destinations accelerating. The leisure travel is slowly developing in eastern destinations, which is also a new trend. If Moscow is more or less a business destination, Simferopol of course is a holiday destination.
someone else. We have intense compe- Do you think in the future the market tition so we have to prove ourselves in in the three Baltic countries becomes the market every single day. more homogenous? No, what you can clearly see is that acWhat led you to a decision to start tually the differences between the marbusiness in Vilnius? kets have grown, the Latvian market is It’s quite clear that airBaltic is really a very different from the Lithuanian marvery small company, I cannot say what ket; we see enormous growth rates, we the critical size is but probably such as have a high number of flights per capita with aircraft, the critical mass is grow- in Latvia, we have the lowest number ing; and we have not reached that yet, of flights per capita in Lithuania; the to reach this in the Latvian market markets are actually going more dialone is very difficult, so when with EU verse than previously. membership in 2004 there came the opportunity to open up a base in Vilnius, For a foreigner who wants to come we did it, and are extremely satisfied in, what opportunities or difficulties should they be aware of? with the results based in Vilnius. First of all doing business in Latvia in a time when everything’s booming is a pleasure compared to previous years. One should never underestimate the difficulties in working in a foreign environment, such as language, local customs, local laws, and local institutions. One has to be aware that most likely there is heavy competition for what you’re doing and a lot of smart people are already around, but Latvia has the advantage of actually being relatively open to foreigners as such.
Now we have 66 direct routes. But we’re still a small airline.
Are customers loyal to airlines or is it all about price, and how do you keep your customers loyal? It’s not all about price, but of course about a combination of things. However, price is the most important factor for holiday travelers rather than business. For a business traveler it is extremely important that your schedule is being met. For the holiday traveler schedule is not as important as destination and price. When it comes to loyalty though, I think don’t think for the customer loyalty means staying with us and tolerating something even if we are not as good as others. A customer will stay with us not because he’s loyal per se to us, but due to the fact that every single day we have a better offer than
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We know you’ve learned Latvian, which is quite unique for a foreign businessman. Do you think a person who doesn’t know Latvian can manage to live and work in this country? Absolutely. It doesn’t mean you can For many companies it’s common not do a good job without speaking the nowadays to start from one country language, but you will not have the in the Baltics and then expand into same 100 percent functionality. AirBalall three. Do you consider it a univer- tic is somewhat unique, since the comsal strategy that Latvia’s too small pany language is English, but I think and you need to look at the region? you need to speak the language of the Not necessarily. I think this regional land you’re living in. approach has some dangers as well because the countries are distinctly differ- What activities do you like to do on ent. If you go to Latvia, you don’t nec- your free time, what restaurants do essarily have to go to Lithuania, why you enjoy? don’t you go to Finland then, it’s much Obviously Riga is a town where it’s fun bigger; actually it’s not even that much to live, otherwise I wouldn’t have been bigger but it’s slightly bigger. In reality here for twelve years; it’s a city that reit doesn’t matter, you’re entering into ally loves to offer, from opera and muthe new world, it’s a different market, sic, theater, to restaurants and bars and with different mentality with different the beach in the summer, so it’s really fun living here. rules.
Issue# | July 007
2007.07.12. 13:20:03
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2007.07.12. 13:20:04
REAL EStAtE
Saving money is every entrepreneur’s dream. If, in addition to that, you are spared the trouble of time-consuming construction, communication connections, etc, to set up your operation the picture looks almost perfect. And it actually is close to perfect – as industrial park developers in Latvia claim when offering international investors a really good service package.
W
dustrial park field, Latvia turned out to have a significantly better developed industrial park segment; furthermore, rent levels are by far lower than those for equivalent premises on the outskirts of Moscow. On the outskirts of Moscow 30 euros per m2 per month on average, whilst in Latvia the same premises are available for 3-6 euros per m2. Numerous investors from Russia have come up with calculations stating that it is by far more profitable to locate production or logistics in Latvia and later transport products to Russia or countries of the European Union. Special interest for Latvia is expressed by Head to Latvia! Why? investors whose markets are Russia, postFirstly, for its unique geographical lo- Soviet states, Eastern Europe and Northcation. Latvia lies on the crossroads ern Europe. According to Jekaterina Koof the routes Estonia – Lithuania and smacheva, head of the Commercial Real Europe – Russia. Secondly, everyone speaks Russian here (which is of great importance for business with the neighbouring country), while service culture and quality is at European level. Thirdly, logistics expenses pay off. There are quite a few more bonus reasons as to why investors choose to set up factories in Latvia to reduce production, distribution and logistics costs. For example, based upon the evaluation of Latvia’s and Russia’s offers in the in-
hile two years ago the number of parks in Latvia could be counted on the fingers of one hand, last year Latvia already had 15 parks with actual tenants. Neighbouring Estonian and Lithuanian developers are unable to keep up – last year they operated 6 and 7 parks, respectively. Hence, in Latvia potential tenants stand a better chance of finding an offer that meets their needs – in terms of the park’s location, the preparation level or premises, infrastructure and services offered.
Estate department of Colliers International, an international real estate consulting company, the biggest tenants are logistics companies of non-Latvian origin. Latvian industrial parks provide them with everything they need: high-quality warehouses with temperature control options, professional service. Examples of such projects are Dommo (Olaines parish – 6km from Riga, 58 ha, rent area 200,000 m2), Dominante Park (Ķekava – 35 km from Riga, 65 ha) and NP Biznesa Parks (Jelgava – 45km from Riga, 111,000 m2). Thereby industrial parks in Latvia are formed like a modern commune (breaking down stereotypes of old Soviet warehouses in the middle of the woods). In turn, Elita Moiseja, executive director of “NP Properties”, an industrial park development company, points out another advantage. Unlike the other countries, most industrial parks in Latvia are reconstructed (brownfield) parks built on the territories of the former Soviet factories. This means that premises are prepared faster (in 3-4 months) and are much cheaper in terms of expenses than parks built from scratch (greenfield).
On the outskirts of Moscow an entrepreneur is charged
30 euros per m2 per month
on average, whilst in Latvia the same premises are available for 3-6 euros per m2
0
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Issue# | July 007
2007.07.12. 13:20:05
Lithuania and Estonia have predominantly greenfield parks. In most Estonian parks land is rented or sold with communications but without buildings. In turn, Lithuania industrial park development is by state initiative. Their developers put less effort into setting up surrounding infrastructure and offering additional services.
Not Enough for Everyone
All of the business park segments are currently being developed in Latvia – technological, logistic, industrial parks. Industrial parks in particular are distinguished in terms of experience. They require longer development periods and larger investment, as tenants, mainly producers, have to be provided with high-powered communications. Unlike foreign companies, to local companies a business industrial park is a relatively new option. The trend has remained unchanged over the last couple of years: demand for quality industrial premises is still higher than supply. The highest demand is in the segment for premises with under 500 m2. This can be explained through low supply, since it is not economically profitable for developers to prepare premises of such size. Excess demand is also persistent for quality premises with area of 1,000 up to 5,000 m2.
What It costs
In Latvia you can find warehouses which cost only 2 euros per m2, but those would be Soviet ware-
houses with no service. Prices for quality production and storage premises: brownfield starting from 4-5.5 euros per m2; greenfield starting from 4.5-5 euros per m2. There is also demand for production or storage Demand structure by required space
19%
4%
23%
8% 46% 5,000 – 20,000 sqm 500 – 1,000 sqm >20,000 sqm
1,000 – 5,000 sqm 0 – 500 sqm
Existing rent rates
Riga
Outer Riga
Riga – market core 5.00–6.00 (EuR)
Outer Riga (>20 km from city limit) 4.00–5.00 (EuR)
Trend 2007/2008 Rents remain stable, but there is the possibility of slow growth in the short-term
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premises with small office spaces – the rent of such offices costs 7-8,5 euros per m2. On average prices range from 3.5 to 10 euros per m2 – depending on location. There is no significant difference in rent rates for parks located in outlyingregions. When choosing the most suitable industrial park, it is important to take into account a number of factors. For instance, lease duration period and the opportunity to expand the area of the premises. Elita Moiseja points out that from their experience 20% of clients wish to expand after some time. In case it is no longer possible in the existing park, they are offered equivalent premises in some other park in the industrial park chain.
Interest Will only Grow in the future
How successfully the existing parks in Latvia will develop strongly depends on their specialization, quality, location and additional service. Rent rates will also be a notable factor. They will directly depend on inflation – the growth in construction expenses. This could be one of the reasons why a “one-day” project with low quality might be extinct in this segment of the market. Interest for modern industrial parks developed in regional centres will grow. Moreover, a number of parks are developed in special economic zone territories, hence, foreign entrepreneurs have an opportunity to gain additional benefits. THE INSIDER
2007.07.12. 13:20:06
tAxES by Ingrīda Mičāne
P
aying taxes is no doubt every businesses duty and matter of dignity. But let us agree – there is a difference between giving away 39% of profit and only 15%, isn’t there? Latvia’s liberal tax system allows foreign investors to still make a profit even after paying all the official taxes. If in addition to that a good adviser – a lawyer - gets involved, it is safe to give one’s mind completely to business and sleep well at night, without worrying about potential profits floating away to the State Treasury, since taxes in Latvia are really low compared to other Western countries. Low Taxes and Bonuses Latvia can really be proud of comparatively low tax rates in the European Union – among the lowest value added tax, corporate income tax and relatively low rates for social insurance payments. And it is the low interest rates that determine the attractiveness of the Latvian investment environment. No wonder foreign investment growth in Latvia in 2006, compared to the previous year, was the most rapid over the past few years – 17%. In Latvia the corporate income tax rate is 15%, which is definitely one of the lowest across the European Union (lower still - only in Ireland – 12%). Furthermore, as Egons Liepiņš (CPA Tax Services), partner of Ernst &
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Young legal counseling, the rate defined by law is at times even lower in practice. For instance, the company’s fixed assets are subject to an accelerated financial depreciation which can be up to 70% a year (which also relates to foreign investor owned enterprises). In turn a 40% tax discount applies to large investment projects where investment amounts to 10 million lats (14 million euros) over three years. A VAT rate of 18% also looks quite acceptable against the other European countries. Moreover, there is a special bonus! A salary that exceeds 21,700 lats (30,876 euros) is free of the social insurance tax burden by definition. The next advantage is that the Latvian tax system is fully attuned to the EU tax system, which means that
there can be no ambiguity or surprises awaiting entrepreneurs from other EU countries experienced in working with the European tax system upon their arrival in Latvia. So one can safely work and profit paying lower taxes. No Big Bureaucracy Let us assume, for instance, a Western citizen wants to start a paying eco-food business. The process is going to be easy and take only a couple of weeks – first one has to form a PLC (SIA) and register as a VAT payer. According to local legislation foreign citizens in Latvia have the right to run business activities in the legal form of a private limited company (SIA – sabiedrība ar ierobežotu atbildību), a joint-stock company (AS – akciju sabiedrība), or as a branch. It is also possible to register a representative office which will not have the right to advertise or promote the head office. A foreigner can even be a single owner of a company in Latvia. From the legal perspective, a foreign citizen does not have to meet any obstacles when founding an enterprise in Latvia. Nevertheless, there are requirements to conform with and rules to follow. Firstly, the company’s director and accountant have to be permanent residents of Latvia. Secondly, all employees of the company have to receive a minimum monthly salary of 125.50 lats, or approximately 178 euros and a social insurance tax amounting to 25% of the employee’s salary has to be paid for each of them. The accountant has to be fully aware of the company’s financial state and its transactions since the accountant is responsible for preparing yearly financial result reports on the company’s balance and monthly tax reports to submit to the State Revenue Service. There is still no way to avoid a fly in the ointment. And that would be big fines. A fine of 100% for unpaid taxes! If the State Revenue Service conducts an audit of a company and reveals unpaid taxes it has the right to impose a fine of 100% or even more, requesting payment of the unpaid amount of tax in addition. As reminded by Liepiņš, tax legislation in Latvia is new and unforIssue# | July 007
2007.07.12. 13:20:13
tunately quite construable. A foreign investor has to bear in mind that there could be problems paying taxes. For example, there have been cases when a foreign tax payer has paid all the taxes but the State Revenue Service turned
before starting a business. Advisers are to be called if only to prepare the documents necessary to found an enterprise, since submitting them to the Register of Enterprises is quite tricky with poor knowledge of the Latvian language.
From the legal perspective, a foreign citizen
does not have any to meet obstacles when founding an enterprise in Latvia.
out to have a different opinion on the matter. As a result fines imposed can amount to inordinately large sums. Although the fines are often annulled, the process evokes a negative reaction and the news reaches other investors. To avoid such underwater stones legal advisers suggest to always request a written clarification of the subject matter from the State Revenue Service, but most importantly – consult tax advisers
Jānis Bordāns, Attorney at Law The Latvian taxation policy’s friendliness in relation to business activities has a twofold evaluation. On the one hand, with an Individual Income Tax rate of 25%, State Social Insurance Mandatory Payments of 24% and 9%, and a VAT rate of 18% Latvia is more tax-payer friendly than most EU countries and the US, when comparing to the maximum tax rates in those countries. Latvia wins even compared to Lithuania and Estonia, where tax rates are very similar, but as my clients noted still higher in total (taking the Corporate Income Tax of 26% in Estonia as an example). However, “the other hand”, which is far less friendly in Latvia, is worth noting. When compared to the other countries there is no meaningful case I could mention where the government
1) Individual Income Tax
2) Corporate Income Tax 3) Real Estate Tax 4) Value Added Tax
Another necessity is to be serviced by an accounting company. All legal bureaus usually provide advisory services in the so-called economic rights. This is a wide range. In turn international audit companies (five of which operate in Latvia) offer audit-related and taxadvisory services. They charge fees in proportion to the consultant’s position and experience – 90 to 350 euros per hour.
5) Excise Tax
of Latvia would at least demonstrate its willingness to stimulate business development. While the governments of the other countries are looking for options to stimulate processes necessary to the economic and social life as a whole by applying variable taxation conditions to different entreprises depending on a number of criteria, it seems that attitude in Latvia is stagnant, taxes are determined and “that’s it”. Everyone has to pay the same irregardless of any additional criteria. There is a well-known example of the Estonian Profit tax – it applies at a 0 (zero) percent rate to the amount of retained earnings, the sum the owners of the company reinvest into further development. Latvian officials competent in the tax field have over many years questioned if inves-
not like to sound judgemental but I have heard quite the opposite from practically all of my clients operating in Estonia. This gesture from the Estonian government is strongly approved. Besides, it is particularly important that the government does not change its taxation policy and maintains the existing laws, thus winning the trust of its taxpayers. The same relates to the Individual Income Tax rate which is lowered in Estonia on a yearly basis and is now 22%, while has remained only a promise over several years in Latvia. Several legal issues relating to taxation are worth being noted separately. It should be appreciated that Latvia has signed the Double Taxation Avoidance Agreements with practically all the countries that it is connected to
6) Customs Tax 7) National Resources Tax 8) Lottery and Gambling Tax 9) State Social Insurance Mandatory Payments 10)Private Motor Vehicle and Motorcycle Tax
However, the taxes are not that “rosy”, claims Jānis Bordāns, Attorney at Law. tors, just like home business owners, are at all stimulated by this since other economic factors are more important; moreover, they are interested in profit anyway, and if it is paid out the tax rate is still higher than in Latvia. I would
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There are 10 types of taxes in Latvia:
through business relations. This provides a possibility to optimize tax payments upon careful evaluation of particular deals and taxation policies in Latvia and the respective country.
THE INSIDER
2007.07.12. 13:20:14
fINANcE
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Issue# | July 007
2007.07.12. 13:20:27
By Ingrida MIčAne
USA very few households miss out on the opportunity to participate in the stock market. According to the Forbes, 24% of billionaires have become ones thanks to their action in the financial markets (George Soros, who earned £1,000,000,000 within a period of one month, is worth mentioning). Inspiring, isn’t it? Meanwhile, in the post-Soviet countries, which also include the Baltic region, the games have only locals. Of course, when we look at the just begun. It is too early to say that West, we see that on average 45% of Latvians are becoming active particithe households invest in stocks, while pants of the market. Compared to the in Latvia the active participants of the neighbouring countries, Latvians still stock exchange can still account for seem quite conservative – only 5% of only 5% of the households. But does it investment is directed towards buying shares. Nonetheless, as awareness and mean that the Baltic stock exchanges knowledge about the stock exchange do not offer anything? That is hardly the truth, say the experts of the indushas grown over the past couple of try during their conversations with The years, an increase in the interest about Insider. participating in the stock exchange More than 50% of the inhabitants can be observed. Much credit can be of the developed Western countries given to Riga Stock Exchange (RSE) are involved in investment in the mar- for contributing to this tendency. Bekets of finance. For example, in the ing a young player in the industry, it
On a pleasant summer afternoon, sipping a nice cold pint of beer in one of the lovely terraces of Old Riga, gazing at the indolent rush of the Old Town and enjoying the scarce rays of the sun, the visitor to Riga finds it hard to imagine that just a few blocks away, behind a sturdy brick wall, action takes place. People are buying and selling shares in the Baltic stock market! This is where charts change, stakes rise, numbers flash by on attentively watched monitors… and sometimes champagne pops are heard or one’s hair is torn out.
If
only a decade ago the average citizen of Latvia believed that the participants of the stock exchange were superhumans in fancy suits that were drawing the picture of finance for the whole world, and news from the New York stock exchange resembled more of a Hollywood thriller than real life, then now the situation has considerably changed. Latvia possesses its own stock exchange. The mechanism behind the stock exchange is no longer exotic, to the contrary: the process has become understandable for quite many
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2007.07.12. 13:20:36
fINANcE century. At that time the stock exchange served as an intermediary for the commerce of products. The main stock exchange building was built in 1855, following the renaissance style of the Venice Palazzo, thereby being a testimony to wealth and abundance. During the period of the Republic of Latvia (1923-1939), the committee of the Riga Stock Exchange continued its performance as the representative of merchandise; its actions included promotion of everything related to imports, exports, banking, development of shipping and launch of the freeport of Riga. Since joining the OMX (www. omxgroup.com) in 2002, RSE abides by the rules (trading, clearing and settlement, corporate governance) that are common with the other stock exchanges belonging to the group. One can say that the action of RSE is governed by high standards which are secured by OMX membership. Practically it means that there is an opportunity of effective business in the Nordic and Baltic market through use of a single stock exchange.
Single Baltic market
While Europe is stagnating, the Baltics grow by 30% per annum! has shown great potential. RSE was founded in 1993 and up to now is the only regulated secondary securities market in Latvia. It became a part of OMX in 2002. OMX group includes the Stockholm, Copenhagen, Helsinki, Iceland, Riga, Tallinn and Vilnius stock exchanges. Starting 2004, the
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operations of RSE are now performed in the same system where such Nordic giants as Nokia, Volvo, SEB Bank and Stora Enso are being traded.
A brief journey to the past
The actual roots of the stock exchange in Latvia can be traced back to the 18th
Even though the Baltic system allows one to trade, the largest part of investment still goes to the account of our neighbouring country Estonia. This can be easily explained through the low awareness of the opportunities provided by the stock exchange, which is still observed among the small investors. However, the tendency is positive – in 2006, compared to 2005, the turnover of the quoted shares at RSE has increased by approximately 15%. The first four months of 2006 witnessed a growth which is more rapid than during the corresponding months of 2005. These facts can definitely be evaluated as positive, notes Chairman of the Board of RSE Daiga Auziņa – Melalksne, while emphasizing that compared to Estonia or Lithuania, the number of companies listed is higher, however, the scope of their business is lower. For example, RSE does not include any of the telecommunication companies; however, it has the appropriate capacity to list Issue# | July 007
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companies of a larger scale. It is just a question of time till more and more companies will list on RSE.
Comparison of Indices EURONEXT (Frankfurt, London, Paris, Amsterdam) vs OMX
Enough to choose from
There are two lists in the Baltic stock market where companies from different industries are represented. The investors have an option to choose.
☑ Baltic main List
The companies belonging to this list abide by the highest qualitative standards. It is very convenient for the investors to choose these companies, as the shares are liquid and the transparency level is very high. This list is the most prestigious within the Baltic stock market. To correspond to the requirements for entering this list, a company has to have a history of business activities no shorter than 3 years, a stable financial situation, market capitalization of at least 4 million euros, accounting reports have to follow the IFRS (International Financial Reporting Standards), and at least 25% of the shares (or shares of value of at least 25 million euros) have to be traded on the stock exchange (free float).
EURONEXT, over the last 6 years, we can easily observe that while the EURONEXT index has experienced a steady fall accumulating to 11.45%, the OMX Baltic has grown by 486.59%. Within the group, RSE has grown by 320.88% during the corresponding period of time. What exactly does it mean? If Frankfurt, London, Paris has experienced negative growth over the last 6 years, the Baltic region is growing by on aver☑ Baltic Secondary List Members of the Baltic Secondary age 33% per annum! List do not have requirements denoting the obligatory quantitative market capitalization or the number of shares to be traded; however, they do abide by the required level of transparency. Obviously the requirements are less strict to enter the Secondary List compared to the Main List.
will find company reports and other relevant information.
Second step: AccouNtS
To start purchasing and selling shares on the OMX, an investor has to possess a current account, as well as a securities account in a bank. One must make sure that the bank where he/she has a current account belongs to one of the 40 members of the Baltic stock exchange. If yes, then the only thing to do is open a securities account.
third step: BRoKERS
Year 2006 – positive balance
Could the investors profit through operations on the Baltic stock market? Yes! On average the prices are growing and investment in the securities at Baltic stock exchanges has turned out to be a success. For several companies the capitalization in 2006 grew by 141%! If we compare the development of indices of OMX Group and the largest stock exchange group in Europe,
How to start? first step: RESEARcH
One has two options – either to perThe potential investor who is inform trades on the market oneself or terested in the Baltic stock market to use the services of a licensed broshould first gather information. ker. If you choose scenario number Start by entering the website of the one, then you can purchase and sell OMX Group (www.omxgroup.com/ shares online. This way you will save balticmarket/market), where you money on commission fees to
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2007.07.12. 13:20:44
fINANcE the broker and have more fun, however, there has to be a certain level of knowledge about these operations. If this is the case, you are welcome to use the E-platform provided by RSE and offered by four Latvian banks which have membership (Parex – www.Parex. lv; SEB Unibanka – www.unibanka. lv; Hipotēku un zemes banka - www. hipoteka.lv; Latvijas Krājbanka – www.krajbanka.lv). Alternatively you can use E-platforms by LHV (www.
lhv.lv) or Hansabanka (www.hanzanet.lv). If scenario number two seems more appealing to you, then you will have the opportunity to receive free of charge consultations about prices, demand, supply in the securities market, however, you have to take into consideration the commissions to be paid. The amo unt and scope of transactions in the market of securities is unlimited. Besides, the commission payable on a
Where to invest?
The best managed companies, which have experienced the highest growth in the price per share within the last year (29.05.06. – 28.05.07.)
Price EuRo 20.05.2006 2.33 2.65 2.48 1.29 8.89
olainfarm Ventspils nafta Liepājas metalurgs Latvijas kuģniecība Grindeks
Price EuRo 19.05.2007. 4.33 3.73 3.43 1.58 10.46
change % 85.8 40.7 38.3 22.5 17.66
purchase/sale deal usually does not exceed 0.5% of the transaction amount. It is, however, a common experience for the broker to denote a fixed minimum commission, the size of which can range from a couple of euros. As you can see, while the capital markets of the large empires are snoozing, the jolly Baltic OMX system allows one to win the jackpot of up to 141% per annum. Not Bad?
P.S.
During the time of preparation of this article the NASDAQ Stock Market, Inc. and OMX AB jointly announced that they have entered into an agreement to combine the two companies, creating the world’s premier exchange and technology company.
If you would have bought shares of Olainfarm a year ago, your profit today would be 85.8%! Comments from an expert:
In
Financial market analyst at Parex Asset Management, Jānis Praņēvičs emphasizes that the Baltic market will continue to succeed in the future as well. Up to now the most attractive investments have been in the pharmacy, real estate and banking sectors.
general, the biggest successes on the Baltic stock exchanges can be described in three words: pharmaceuticals, retail and banking. Companies from these industries have enjoyed the most rapid revenue and profit growth and have generated the highest returns over the last year. The best example on the Riga Stock Exchange is pharmaceuticals company Olainfarm, which has more than doubled its revenues in the last three years, is expanding
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its product portfolio and has excellent growth prospects. Over the last year Olainfarm shares appreciated by 67%. In Lithuania (part of OMX) the top performer is the banking sector, especially Ukio Bankas which concentrates mainly on the corporate client segment, has some activities in real estate development and enjoyed a breakneck profit growth in 2006: +141%. This year the company expects to increase its profit by more than 40%, and tak-
ing into account that the banking sector in Lithuania is rather underdeveloped compared to the EU, this target is fully achievable. Also, most of the best performing companies on the Baltic market have one common trait – they pay very small or even no dividends. However, this fact is completely countervailed by the already mentioned high returns – after all, an investor should be indifferent to how his wealth is increased – through dividend payments or share price appreciation. Even more, as there is dividend tax for non-residents in Baltic states, companies that are not paying dividends are more attractive for foreign investors. Issue# | July 007
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PRomotIoN
Scandlines – number one amongst the Baltic Sea ferries The Scandlines AG, is one of the largest ferry companies in Europe. With 24 vessels operating on 12 ferry routes between 20 ports in the Germany-Denmark-Sweden triangle as well as to the Baltic States, Scandlines maintains one of the densest route networks of all the ferry companies in the Baltic region. Scandlines’ fleet carries around 20 million passengers, 4.2 million cars, 1 million trucks, 80,000 busses and 88,000 railcars each year. Routes
You want to get to various destinations from the Baltic States to Scandinavia and West Europe in the shortest possible time? No problem with Scandlines’ extensive route network. You simply choose what Scandlines services you want to use to reach your destination.
Due to both new terminals for cargo units and passengers – the new passenger terminal will be opened during the fall 2007 - the port of Ventspils offers perfect conditions for the optimization of the logistic chains and passengers sailing with the Scandlines-ferries service of the highest quality.
- a free one –way crossing (port charges extra) - a free cabin ( same class, depending on availiability) - 10% discount in the Border Shop and Bar on board ( excluding tobacco products, magazines and special offers) - Scandlines also has a large number of special offers for short trips, as well as bus and group travel.
Good morning ticket
From the Latvian port of Ventspils, Scandlines gateway from the Baltic States, combined cargo/passenger ferries set course to Rostock (Germany), Karlshamn and Nynäshamn (Sweden). With the Ro-Pax vessels “Ask” and “Urd” operating on the Ventspils - Rostock route you are able to reach Central and Western Europe via the port of Rostock with its excellent hinterland links in just about 26 hours. From Klaipeda (Lithuania) the Scandlines cargo ferry “Sea Corona” takes course to Aabenraa and Arhus (Denmark). “One of the most important ferry lines for Latvian travellers is the Ventspils – Nynäshamn (60 km to Stockholm) connection. The ferry “Petersburg”, by many of our regular customer known from the early Klaipeda service, takes 5 times per week course to Nynäshamn. The travelling time is only 11 hours and an additional plus is, that all meals on board are included in the ticket price”, says Veronika Kaliakina manager of Scandlines UAB. Each week the four Scandlines-ferries travelling between Ventspils and Germany/Sweden, equipped e.g. with comfortable cabins with WC, shower and TV, are carrying more than 1300 trucks and trailers, hundreds of passenger cars and about 1000 passengers.
You desire to continue your journey from Sweden to Central and Western Europe? With Scandlines you can take advantage of the Trelleborg (SE) – Rostock (D) service (3 times per day) and the Trelleborg (SE) - Sassnitz (D) route (5 times per day). Another low priced alternative offered by Scandlines are the Sweden transit tickets from Helsinborg (SE) to Helsingør (DK) via Denmark to the most frequented routes to Germany, which are the Rødby – Puttgarden and Gedser - Rostock- route. On the Rødby - Puttgarden route 4 modern, identically designed double-ended ferries cross the Fehmarn-Belt in just 45 minutes at 30minute-intervals. The Gedser - Rostock service is playing an increasingly important role in the Scandinavia - Southern Europe and Scandinavia - Southeast Europe transport corridors. The route is served by two ferries, guaranteeing a crossing time of just 1 hour 45 minutes at two hour intervals from both ports. travelling and saving with Scandlines Scandlines customers can now save even more with the “Scandlines Bonus Card ”. After 10 one – way journeys from / to Ventspils, registered holders of the “Scandlines Bonus Card” will receive , where capacity permits:
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From 01.07.07 Scandlines offers the “Good Morning Ticket” on the route Ventspils – Nynäshamn vv. This ticket can be bought for departures on Monday and Sunday from Nynäshamn and for departures on Wednesday from Ventspils. The ticket price includes the ferry crossing from port to port as well as 2 meals on board (brunch and dinner) without any seat or cabin reservation. Passengers can enjoy the crossing in the restaurant, the Panorama bar or on the outdoor sundeck if the weather is nice. If needed, passengers can book a pullmanseat or a cabin on board. Then they would have to pay the price difference to the regular price. The “Good Morning Ticket” costs SEK 325 or 35 € per person + SEK 95 or 10 € port fee per person. The price for a private car (up to 6 meter length) is 785 SEK or 85 €. “We hope that this new ticket offer for our clients will be a good alternative to travel between Sweden and Latvia and back with a sailing time of only 11 hours for a nice low price”, the route manager Brian Lindberg said. From today you can book this new ticket in all Scandlines Service Centres, Port Agencies and at your Travel Agency.
Reservation and information around the clock From the office or from home – with a simple mouse click at www.scandlines.lv, you can obtain direct information about virtually all the routes from Ventspils (see timetable on page 36), as well as reserve tickets. You can contact the Scandlines Servicecenter Balticum in Klaipeda. From Monday till Friday 09.00 – 18.00 and Saturday 10.00 – 16.00 Tel: 00371-77-96900 www.scandlines.lv Scandlines UAB N. Sodo 1, LT – 92118 Klaipeda
THE INSIDER
2007.07.12. 13:20:47
LIfEStYLE By Jekaterina Strelcova
In the fast-paced rhythm of modern life it’s very easy to succumb to fast food. A hasty lifestyle, long working hours, the hustle and bustle of the city - and here we are grabbing hamburgers on the go and washing it down with Coke. Yet the more urbanized and fragile human beings become, the more city slickers are concerned about ecological food concepts. Interest for organic food is awakening in Latvia as well with a lot of possibilities for rural development, in that perspective.
Mārtiņš Ritiņš, chef of top Riga restaurant Vincents, and founder of the Slow Food movement in Riga, shared with us his insights on the benefits of ecological and slow food on both the personal and country levels. 0
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Ecological and slow “Would you consider taking antibiotics daily?” Martiņš puzzled us at the beginning of our interview. Of course not. “But you are, with almost every meal you take there are dangerous pesticides and chemicals that poison your body.” No wonder most of us are prone to viruses, diseases and premature aging. But first things first: let’s define what ecological food means. Ecological food is produced according to certain standards. For crops, it means they were grown without the use of pesticides, artificial fertilizers, or human waste, and that they were processed
without ionizing radiation or food additives. For animals, it means they were reared without the routine use of antibiotics and without the use of growth hormones. To put it simply, grown in natural free conditions, animals and vegetables are not just happier, but also healthier. Slow Food is a bit different from ecological. Slow Food is good, clean and fair food. This organization was founded in Italy in 1989 to counteract fast food and fast life, the disappearance of local food traditions and people’s dwindling interest in the food they eat. The symbol of slow food is a snail, which is embroidered on Martiņš’ chef’s uniform cuff, and a larger bronze specimen greeting you at the entrance of Vincents. As a representative of Slow Food, Martiņš is all in favor of using local production. Being asked to what extent Vincents’ menu consists of eco products, Martiņš says, “We use as much fresh ecological ingredients as possible, which we get Issue# | July 007
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from our own list of suppliers, and we folkloric knowledge that generations have accumulated fills me with respect never use farmed fish.” and awe for where my food comes from, and what it is that I put on my Organic farming in Latvia Besides a few bigger towns, Latvia’s plate, and those of my patrons”. territory is mostly quiet countryside with great conditions for growing “Growing” interest green. “Promoting ecological and slow food After decades of kolkhozes - the Soviet in Latvia is very important”, says collective farming system, traditional Mārtiņš. There have already been steps households are now gradually emerg- made to create awareness of healthy ing. During recent years ecological local products. farms have been mushrooming, with the The Association of Latvian Organic total amount exceeding 2,000 now. Yet Agriculture, uniting Latvian eco farmthe demand for organic food in Latvia ers, was formed to support, educate, is far from its European neighbors. and help promote ecological growing. Contrary to other European countries, The organization issues licenses, so there is very little government support that most (yet not all) true ecological to local ecological farmers. Ecologi- production is tagged “Latvijas Ekocal food producers are mostly small produkts”. There is also the so-called households, specializing in one or two Green Spoon sign, which is a quality products, and it is very hard to com- award of the best Latvian products, pete with cheap mass exports. given by the marketing council of The EU laws also lie heavily on the shoul- Ministry of Agriculture. ders of Latvian farmers, as Mārtiņš put More activities, involving the wider it, “There are just Ten Commandments public, both locals and tourists to proin the Bible, describing the rules for mote eco food and lifestyle are comthe whole life, but the amount of rules ing up. “When I was living in Canada, and regulation for a single chicken egg for instance”, says Mārtiņš, “Annual Feasts of The Field, organized by the is enormous!” Another problem is lack of demand organization Knives and Forks, were from the locals, and surprisingly low extremely popular, with families drivdemand from the HoReCa (hotels, res- ing for hundreds of miles to shop in the taurants, cafes) sector. “If restaurant ecological food fair”. owners and chefs placed certain orders A couple of years ago Mārtiņš, with the to farmers, it would boost ecological help of some enthusiasts started Green farming, as the farmers would be more Fairs in Riga. The first annual festi-
“There are just Ten Commandments in the
Bible, describing the rules for the whole life, but the amount of rules and regulation for a single chicken egg is enormous!” assured they will be able to sell all their products”, says Mārtiņš. Mārtiņš also says, “I derive great pleasure in visiting the small farms that are everywhere in Latvia and strolling through the verdant pastures and fields, because invariably the farmers are hospitable and proud of what they do. The
vals were held at Dome Square in Old Town, but now every second and fourth Saturday of the month there are mini Green Fairs at Berga Bazars, where you can buy the best country delicacies. Green Bazaar is an actual place where, just like in the middle ages, the buyer can meet the producer. You are more
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than welcome to join the Green Bazaar to enjoy a sunny morning, wandering through the aisles of the market with a wicker basket, picking up the freshest products grown locally with love. Remember that the good that eating ecological food does will not come in a flash, it has more of a cumulative effect – in the long-term your body and mind will be thankful for such care.
Which eco-products are available in Latvia? Grain (rye, wheat, oat and barley) Dairy products (milk, curds, cream, butter) Herbs and tea Meat and eggs (mutton, rabbit meat, beef, chicken, duck, turkey and pork being Latvian favorites) Fruit, berries and mushroom, vegetables
Where to eat ecological food: To enjoy more organic food, here is our list of restaurants, where health is a main course: Vincents – Elizabetes 19, Tel: 733 2634 Kaļķu Vārti - Kaļķu 11a, Tel. 722 4576 Bergs – Elizabetes 83/85, Tel. 7770957
Where to buy ecological food: Latvijas ekoprodukts store in Riga, 45/47 Kr.Barona street, entrance from Stabu street. The store is open on working days: 9:00 - 19:00, Saturdays: 10:00 - 17:00, closed on Sundays. Ekovirtuve café and store in Riga, the quiet center, 11 Rupniecibas street. Open on working days and Saturdays: 9:30-20:00, closed on Sundays.
THE INSIDER
2007.07.12. 13:20:53
LIfEStYLE By Jekaterina Strelcova
Hunting in Latvian forests
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atvia has deep-rooted hunting traditions. Once hunting was prohibited, but today thousands of hunters in Latvia consider it as a sport, hobby, profession and even a way of life. Hunting is not all about shooting to ego boost a man’s inner chest-beating caveman; it’s more about enjoying nature and the things it has to offer. Versatile Latvian fauna counts 62 species of mammals and 223 kinds of birds nesting here. The most popular game animals are roe deer, red deer, wild boar, moose, beaver, as well as wildfowl: such as snipes, capercaillies, black grouse, and woodcocks. In Latvia it is possible to hunt almost all year long, depending on the hunting season for a certain animal. Periods of high hunting activity are followed by more quiet seasons, for instance, in spring. The peak of the season is somewhere in late October, when hunting for most of the species opens up. There are different methods of hunting as well: stand, still and driven hunting. In stand hunting, a hunter usually sits on a high seat or a tower with a clear view of surrounding areas. Stalking is a technique in which a hunter moves slowly and deliberately through prime game territory, stopping often to watch and listen; it is mostly used for hunting roe bucks or red deer and moose
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Latvia is much more than its capital Riga, with its restaurants and nightlife in full swing. There are numerous ways to spend an unforgettable time outside the city, and hunting is one of them. Bernhard Loew, regional director for Schlossle Hotel Group in Latvia and Estonia, a passionate (and as we discovered an extremely prudent) hunter, told us about hunting possibilities in Latvia. during rut. Beating is practiced in a group, when the hunters are waiting in previously appointed places, while a group of beaters with or without hunting dogs comb a definite forest area, disturbing the game and driving it towards the hunters.
Bernhard and the capercaillie
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hat is hunting for you? Is it a hobby? I would say this is a lifestyle. First, you have to have the love for nature. It might sound like a paradox: how can you love the nature and at the same time go out and shoot. But there some reasons: number one – every human being still has this hunting instinct in them, probably men more than women, because historically it was a man’s duty to provide the food. But having said that, I think I need to go further – there are many ways game is affecting society – for instance, if you have an overage of wild boar, it will lead to a tremendous damage to the farmers, by digging up the potatoes or destroying the crops. For me hunting is a responsibility, because every action you set has a counteraction in the nature, you start a chain reaction. For example, there is always a leader in the flock - usually the strongest and oldest deer. During the mating season there will be fights between males, and the strongest will survive, the others Issue# | July 007
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will be given a secondary part. Sooner or later it will change – the leader will be getting older and weaker. Sometimes there are quite brutal fights – one can kill another just with the antlers. If you are out there as a hunter and you have done your homework well by being out and observing a lot, you can notice that in this area you have a very old buck, but you have another three young bucks that are all looking good, strong and healthy. It might be just a time now to harvest an older one to give a way for a younger generation. You are there to keep the balance, not bring destruction. Once you take this on – you have to go with it.
don’t understand this. There are “hunters” who just go out, shoot, picture themselves next to their trophy and get drunk. I don’t like that; it has nothing to do with hunting. A true hunter, even if there’s no hunting season, goes out in the forest to watch and learn animals’ behaviour. Here in Latvia you still have natural predators – wolves and lynx, which many countries don’t have. If you have a weak or sick roe dear, chances are that these predators sooner or later will get it. In those countries, where you don’t have predators, hunters have to take on this part. If you have this sick roe buck out, for example, and he mates with a female, chances are his offsprings will inherit it. Sometimes animals damage not only their population, but also the whole environment, so there should be a certain balance between males and females, old and young. I have never heard of a hunter who would kill a pregnant wild bore – there are certain laws, which a decent hunter complies with. So in way hunters are forest sanitarians.
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hat do you like most about hunting? What I enjoy most is sometimes being hat is the essence of hunting? alone in the forest. You go out early in the morning, it’s so quite you don’t To shoot is only the final touch – it’s hear a sound, you sit for two-three the tip of an iceberg. A lot of people hours, and suddenly – before you
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Hunter’s vocabulary
Even today hunters use their special language, see what it stands for: High game – species, hunted by aristocracy (red deer) Low game – species, hunted by common people (rabbits) The lights - eyes (of a deer) for twinkling The mirror – a tail (of a roe deer), reflecting light The plates – ears of a wild boar, because of their shape when raised up Cigarette time – a time of 10 minutes after a shot, during which a hunter doesn’t approach a wounded animal because it might still be alive and hurt him know everything comes alive. The same happens in the evening. You go out late afternoon, you sit there for hours and you hear sounds all around you, but then suddenly – you can hear nothing but the silence. You can hear your heart beat and the pulse. Then you realise a human being doesn’t mean anything in the universe. You sit there and nothing happens – and then all of a sudden in the middle of the field you have this deer or wild bore standing in front of you – where does that come from? You didn’t see and hear them coming, so they must have been near for nobody knows
When you see a female deer coming with a young one behind, which is still wobbly on its legs trying to keep up – my God, this is so beautiful.
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lifestyle to those people. I have my own hunting region and I can’t just go out whenever I want to, I have to notify the authorities that I will be out hunting with a certain number of people. The government gives out a certain amount of licences and there are certain hunting times, so now, for instance on the 1st of June roe buck opens up, but it doesn’t mean I can shoot the female or a young one, female’s season opens in September. Later on we might need to shoot young ones or females if there’s a risk of overage in a certain area to keep the balance. Whenever you see something you report it back, and so do other hunters, so that the government knows that in this particular region there is an overage of females, so next year they’ll distribute licences accordingly.
Rare trophy – roe deer how long. But if I see the game is too young or it’s not the hunting season for this particular specie, I just don’t shoot, and I’m driving home just as happy. When you see a female deer coming with a young one behind, which is still wobbly on its legs trying to keep up – my God, this is so beautiful.
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hat are the hunting traditions in Latvia? Almost every country has its own hunting tradition. In some countries it means – going out on the first day of hunting, and shoot as much as possible, but they are not skilled, they have no understanding of wildlife. Where I come from (Austria), hunting tradition goes back for centuries, and we are taught to care for the game as well. Even today we go out and feed the game, in winter, when they don’t have enough food, so that the game survives. In the German speaking area, including France, you have schools where people learn about wild animals: how to distinguish a male from a female, how long pregnancy lasts for different species, and have state exams. Latvia has inherited hunting traditions 34
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from German-speaking countries. It might sound strange or stupid, but actually we respect the game. For instance, here we have a ritual of honour to the game you have just shot. We take a branch of a fir-tree and we put it into the mouth of an animal as a last bite. We also take another one and dip into the blood of an animal, then pass it to the hunter, thus showing respect for his pursuit. The tradition also goes back to the 14th - 15th century, because since then it was considered the profession. In those days the aristocracy didn’t want other people to hunt what they hunted. So even today we have the high game and the low game, not because of the size, but deriving from the status.
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hat is the situation of hunting in Latvia and legislation on breaking the laws? I am very happy about what is happening in Latvia. They are looking at the German example, and now, when we are part of the European Union, there are also EU laws regulating the situation, and there are very strict rules. In Latvia if they catch somebody poaching without a hunting license or outside of the season, the government is very rightfully strict
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here do you usually hunt?
My personal hunting region is in Tirza, near Gulbene, it is around 1,700 hec-
Open season Huntable species and hunting seasons Red Deer 1.September - 31.January Moose 1.September - 15.December Roe Deer bucks 1. June - 30.November does 15.August - 30.November Wild Boar 1.May-31.January Beaver 1.August-31.March Capercaillie 10.April-10.May Black Grouse 1.September - 31.October Wolf 15. July - 31. March Lynx 1.December - 31.March Issue#1 | July 2007
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Before you start packing for a hunting tour, you might contact Mr. Loew or check out following web pages: www.latma.lv www.hunting-latvia.com www.safari.lv
as early as possible; otherwise I can’t ensure them a place. We have a price list and special packages, we also give a guarantee: if they don’t shoot a promised hunt, there will be certain refund.
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tares. But I don’t use it for my hunting clients. With my clients or friends we usually go in the area of Lubana or Ziguri, on the Russian border. Jekabpils area is also good for hunting. Kurzeme forests are also good depending on what you want to hunt.
o you also provide guns and other
equipment? Since entering the EU the law has changed. It is forbidden to lend hunting guns to clients. The client has to bring their own guns. They also need to provide copies of certain documents, and I’ll arrange everything internally hen does the hunting season to get them the local hunting licences for certain species open? and custom papers for the transport of In June you have roe buck, the wild boar, the animal. and that’s it. The peak time is Septeman an individual enjoy hunting ber - October, because then you can hunt or does one need to organize a moose, red deer, roe deer and wild. group? o you also organize hunting I have smaller groups of three to five tours? people coming in the beginning of As far as I know, we are the only hotel June, but I still consider them as inthat offers hunting packages, because it’s dividuals. In October there are more very difficult for a non-hunter to promote groups as we organize driven hunts. and sell hunting tours, since there too many specifics. We had a tremendous hat do you do with the meat success on doing it for 6 years. Besides and trophies? Latvian, we had articles in a big German Of course cook it! Usually this is done and the largest British hunting maga- on the spot, but of course we can do zines about hunting roe buck, beaver, field preparation and you can take it to and caipercaille. This year I’m working Riga. There are special fees for shipon producing videos about hunting that ping your trophy abroad, depending on will also promote Latvia as a destination, the size and specie of an animal. which has so much to offer. Hunting may last three-four days, hat is your favourite recipe? during which hunters would stay in My all-time favorite is a rack a countryside lodge. Usually we take of wild boar with bitter dark chocolate them straight from the airport to the sauce, broccoli and sour cream potatoes. hunting area. I suggest my groups go Roe deer carpaccio with quail eggs and hunting first, but they can visit Riga marinated lentils is also great. Someon their way back. Otherwise, if they times I have my game prepared in the don’t harvest any game, they might hotel and share it with my managers. have a feeling that they could have had their luck on the first day, while in hat is the your most memoraRiga. Not depending on their success ble hunt? though, as a reward or compensation, Each hunt is memorable. Every time they might still want to see some cul- you go out, you will never have a huntture in Riga on the last day. ing experience that equals to another one, I have an average of 55 – 60 hunting because you always behave different tourists every year. People need to book and the game always behaves different.
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Every time you go out it’s exciting and I have a saying that when you go out you have to expect the unexpected. A certain type of game behaves a certain way, but sometimes you experience something, which is totally different and when you tell it to other hunters, they might wonder “how come is that possible”. Sometimes a hunter shoots two pieces within a short amount of time, from half an hour to minutes’ apart on the same area. I had such an experience a few years ago here in Latvia, near Lubana. I think it happens once in a lifetime. I was hunting from a high seat on an open field with a few bushes. Once in a while you take out your binoculars and watch, and I saw something reddish in the bushes – a red-brown roe deer, and I was waiting for my chance. At the same time I saw a wild boar, I hesitated for a second on which one to choose. First I shot the boar, but the deer didn’t move. Sometimes animals don’t associate the sound of a shot with danger. So in a few seconds I shot the other one as well.
In the “bag”
Here is a list of some things not to forget: • Moisture proof clothing - remember, the Baltic summer is someone’s winter • Anti-repellent - if something is really evil in Latvia, these are the mosquitoes • Your own shotgun with an EU licence or any document proving your legal ownership • Encephalitis vaccine - will hurt just like a mosquito’s bite, yet might save your life • Photo camera - even if you don’t get a trophy, wonderful photo shots guaranteed
THE INSIDER
2007.07.12. 13:21:44
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THE INSIDER
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