BQ BALTIC ISSUE 01

www.bq-magazine.co.uk

ISSUE ONE: WINTER 2014

the linen queen Fabric empire’s seamless success story out of the woods Walk on the wild side keeps tech giant alive ESTONIA’S E-GOVERNOR Lunch with Nortal’s boss growth culture Riga prepares to welcome the world

history man ISSUE ONE: WINTER 2014: BALTIC EDITION

Latvian premier Valdis Dombrovskis on a momentous chapter in his nation’s history on the eve of its Euro switch BUSINESS NEWS: COMMERCE: FASHION: INTERVIEWS: TRAVEL: EVENTS

Each quarter BQ brings its readership a wealth of business intelligence and information, whilst looking ahead to forthcoming events and reporting on recent developments that will have a significant impact on the Baltic business landscapes

SUBSCRIBE NOW BQ is no ordinary business publication. With unique content and a style determinedly its own, its aim is to inspire, enlighten and empower, embracing and reporting business success wherever it is found.

Receive BQ Magazine each quarter: Annual subscription rates In Estonia, Latvia, Lithuania: a25 (including postage costs) Outside the Baltics, rest of the EU: a30 (including postage costs) Outside of EU: a35 (including postage costs) (Prices do not include VAT)

To subscribe to an annual subscription to BQ Magazine please contact Kate Kolbina, Project Manager +371 26076436

kate@bq-baltic.com

ENTREPRENEURS•SUCCESS STORIES•INTERVIEWS•INSIGHT•OVERVIEW NEWS•EVENTS•FASHION•EQUIPMENT•TRAVEL•RESTAURANTS

WELCOME

BUSINESS QUARTER: Winter 2014: issue ONE

BQ Editor Colin Donald with Latvian PM Valdis Dombrovskis (interiew p22) Welcome to the first edition of BQ Baltic, and thank you to everyone who has made this exciting new venture possible: writers, photographers, interviewees, advertisers and many others.

Our purpose in creating a pan-Baltic, English language magazine, is to showcase the best that the Baltic States have to offer in entrepreneurialism, business leadership, leisure, hospitality and culture.

Our team is fanatical about quality in what we present and in how we present it. As well as showing what makes Baltic businessmen and businesswomen tick, we will also showcase some of the best ways to spend your hard-won rewards.

Let me offer an illustration of Baltic brainpower on the world stage - one of the main themes of this magazine.

I recently attended the annual Cambridge Baltic Conference, held in England’s most attractive university city. Said to be the biggest pan-Baltic event held outside of the region itself, this recently initiated, would-be annual event brings together the best and the brightest of students from Estonia, Latvia and Lithuania studying at Cambridge and other UK universities.

Also present are Baltic-focused academics, senior commentators, statesmen and financiers from around the world. This year’s ranking VIP speaker was former President of Lithuania Valdas Adamkus.

There were arresting presentations about collective future and opportunities and risks for

the Baltic states, in the context of their economic and strategic relationship with the EU, and of course with Russia and its peripheral neighbours. This is a hot topic given the imminent November Eastern Partnership Summit in Vilnius.

As well as the casual networking conversations, it was the participatory sessions, on branding, on innovation, on social and political development and on higher education, that said the most to this observer about the future of the region. The innovation session I witnessed, where participants were tasked with presenting and defending a business proposition, gave a strong flavour of ambition, single-mindedness and a new co-operative, collaborative spirit in the region.

No doubt there are similar events elsewhere in Europe and the US, wherever young high-fliers from the Baltic diaspora gathers together to envisage future growth and development.

I sensed an impatience and seriousness of purpose (unfamiliar from my own Cambridge days), to be getting on with the task of fulfilling the nations’ potential. As several speakers referenced, this is a matter of making more out of the Baltics’ rich resources in human - and linguistic - capital, natural assets, and their strategic position in one of the world’s geographical sweet spots.

It is the aim of BQ Baltic magazine, to capture some of the spirit behind the region’s astonishing two decades. This spirit has been at least as evident in bad times as in good.

It is not necessary to attend academic conferences to get the Baltic buzz, and to learn about the region’s bright future. It is enough just to talk to business people, like the leaders and thinkers featured in this edition, or just to be present in certain hotel lobbies and other business networking hotspots.

I hope that the magazine will help to clarify the themes that will underlie the Baltics’ future success. I further hope that you, the reader, will help to shape this agenda with your feedback and suggestions. Most of all, I hope you enjoy it.

Colin Donald Editor, BQ Baltic

03

CONTACTS Cormack Consultancy Group e: kate@bq-baltic.com t: + 371 26076436 EditorIAL Colin Donald Editor e: colin@bq-baltic.com Design & production room501 e: studio@room501.co.uk Photography Gatis Rozenfelds e: gatis@rozenfelds.com Vygintas Skaraitis e: skaraitis@gmail.com Birgit Püve e: birgitpyve@gmail.com Kaspars Goba e: kaspars.goba@gmail.com advertising Estonia: Nordicom e: advertising@nordicom.ee t: +372 5666 7770 Latvia: Anna e: anna@bq-baltic.com t: +371 29918829 Lithuania: Ugne e: lithuania@bq-baltic.com t: +370 68304422 DISTRIBUTION AND SUBSCRIPTIONS Kate Kolbina e: kate@bq-baltic.com t: + 371 26076436 All contents copyright © 2013 Cormack Consultancy Group.

All rights reserved. While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All information is correct at time of going to print, November 2013.

Published by CCG under licence to room501 Limited. Room501 Limited is part of the BE Group, the UK’s market leading business improvement specialists. www.be-group.co.uk

BALTIC EDITION BQ Magazine is also available in the UK. www.bq-magazine.co.uk

BUSINESS QUARTER | WINTER 14

CONTE

2

BUSINESS QUARTER: WINTER 14 ALL HAIL THE LINEN QUEEN

28

Features 22 HISTORY MAN Latvian Prime Minister prepares for a crucial chapter for his country’s history

28 THE LINEN QUEEN Mixing the old and the new pays off for fast-growing fabric empire

48 OUT OF THE WOODS How Mother Nature had a hand in tech giant’s success story

54 LATVIA’S NEXT MOVE Can Latvia’s growth engines continue to spin this quickly?

36 NEW WORLD ORDER

58 AWAITING THE WORLD

Nortal’s self-made chairman sets out plans for the future

Maximising the impact of Riga’s moment in the sun

BUSINESS QUARTER | WINTER 14

04

NORTAL CHIEF’S NEW WORLD ORDER

36

TENTS BALTIC EDITION

34 COMMERCIAL PROPERTY

The deals and developments shaping the Baltic’s skyline

OUT OF THE WOODS

42 RESTAURANT REVIEWS BQ checks into some of the region’s hottest food and drink spots

Regulars

44 TRAVEL Experience eco luxury in the heart of the Lithuanian countryside

66 FASHION An inside look at ultra-cool yet practical outdoor brand Barbour

06 ON THE RECORD A real estate plan that promises to ring real changes

12 NEWS Who’s doing what, when, where and why here in the Baltics

20 AS I SEE IT Why we need talent to get back where it once belonged

74 EQUIPMENT

48 AWAITING THE WORLD

Get ready to take a ride in a regal roller with real bite

80 REAR VIEW With BQ’s backroom boy Charles Cormack

82 EVENTS Gatherings, seminars and conferences that could boost your business

05

58 BUSINESS QUARTER | WINTER 14

ON THE RECORD

WINTER 14

Latvia’s Minister of Economics Daniels Pavluts

>> Real estate plan promises real change A scheme requiring foreign investors in Latvian property to pay into a new economic development fund will “boost the capabilities of the Latvian economy”, the country’s economics minister says. Anna Rozenfelde reports In an interview with BQ Baltic, Latvia’s minister of economics Daniels Pavluts outlined a proposal, agreed between the three parties in the country’s governing coalition and subjected to parliamentary approval, to channel new one-off payments of €25,000 by purchasers into a fund to promote grass-roots economic development.

Pavluts’ suggested new “economic development fund” appears designed to allay fears, including those of right-wing coalition

BUSINESS QUARTER | WINTER 14

partners the National Alliance party, that the proceeds of the existing residency permit scheme were not sufficiently benefitting ordinary Latvians.

Mr Pavluts said: “We are introducing this mandatory payment of €25,000 per [residency] permit. That money goes into an economic development fund we can then distribute to develop the capabilities of our economy.

“We do see the need to finance programmes

06

related to re-migration [ie. encouraging Latvian expatriates to return], to labour force development, to the co-ordination of improvements in education, for grants to SMEs, for creating jobs etcetera.”

He added: “We want to find more direct ways of stimulating the Latvian economy and its capabilities rather than just relying on the real estate sector and increases in consumption.

As part of [the solution to] these temporary resident permit issues, this new fund will be

WINTER 14

created by these one-off, non-refundable contributions.” The proposal has been given a guarded welcome by the National Alliance, Latvian nationalist coalition partners of Pavluts’ centre-right Reform Party, who believe that the extra payment “may reduce total residency permit requests”.

But the party demanded “more clarity” about the scheme’s implementation.

Introduced in 2010 in an effort to boost foreign investment in Latvia, the residency permit regime was designed to attract foreign cash to bolster Latvia’s recovery through the offer of renewable five-year residence permits in return for property purchases.

The scheme, which has parallels in other investment-hungry European countries, including Portugal, Spain and Ireland, has proved too successful for some immigrationwary Latvians. Residence permits allow purchasers, many of whom are from the CIS and a significant minority of whom are Chinese, rights of residence and free

ON THE RECORD

credited it with restoring their fortunes after the disastrous bursting of the property bubble in 2008-2009.

Aldis Riekstins, head of brokerage for Latio Property, one of the many real estate companies who have praised the scheme, describes the proposed changes as “stupid”.

He claims that up to 25% of his firm’s transactions are comprised of foreign buyers taking advantage of the residency permits-forinvestments scheme to buy Latvian property, and, because the properties involved tend to be high-end, “an even bigger proportion of our income”.

He declined to give a specific figure of the proportion of Latio’s turnover derived from sales to foreigners.

“It has been very important” Riekstins told BQ Baltic. “A lot of investment has come via real estate since 2010.

“There has been a big demand for new property, and more and more foreign buyers have been coming in.”

The money will not go to the countryside.

The money will go to Riga and Jurmala, as it always has

movement throughout the 26 Schengen countries of the EU. Since it was introduced, the offer has attracted nearly US$1bn worth of foreign investment in real estate and equities, according to Latvia’s Office of Citizenship and Migration Affairs.

Property investors must spend a minimum of LVL50,000 or LVL100,000 (US$95,000US$191,000), depending on location, to obtain a permit.

Those buying Latvian equities have needed to invest at least LVL25,000.

As part of the negotiations over the 2013 budget, the larger parties in Latvia’s three-party coalition were forced to make concessions to the right-wing National Alliance, ending the LVL50,000 payments for purchases outside the main urban centres.

Changes to the scheme are widely opposed within Latvia’s property sector, which has

“Usually it’s Russian clients who are renting quite expensive apartments in Riga and [upmarket seaside resort] Jurmala, they are not just spending [the minimum] €143,000, usually it’s more, it’s between €200,000-300,000.

“But it’s not just benefitting us in the real estate sector, it’s lawyers, it’s notaries, it’s all different kinds of companies providing due diligence, book-keepers, tax and legal services.

Then there’s the construction companies who are making all the necessary changes in the apartments, it’s furniture, it’s cars, it’s restaurants - there are a lot of different ways that money is coming into the economy”.

According to Riekstins, on top of the 2000€3000 per sq m that well-heeled, usually Russian, foreign buyers will pay for their properties, they will pay an additional€ a500-600 per sq m on refurbishing their new

07

properties, in various taxes and also on physical refurbishment.

This is provided by local labour, which takes the money it earns, Riekstins says and “puts it back into the economy.”

“Foreigners are worried about the proposed changes that they read about in the local media, but even if the amount of investment needed will be upgraded, they will not close this programme”.

Riekstins claimed that raising the bar to entry into Latvian property risked restricting its ability to bolster poorer parts of the country: “We will be cutting the rural areas. From my point of view this is stupid.

“The money will not go to the countryside, the money will just go to Riga and Jurmala, as it always has, not going to the rural areas where the money is needed more”.

“This is just because of next year’s election, it’s the only way to attract ordinary people to vote for the Government.”

Einars Cilinskis, a Latvian nationalist National Alliance member of the Saeima [parliament] told BQ Baltic that his party opposed the residency permit scheme on the grounds that: “We oppose immigration and we don’t feel that immigration from Russia and China is something that should be specially stimulated.

The second reason is an economic argument.

Bringing money in and stimulating the growth of the property sector harms other sectors. We see the possibility of the growth of a new economic bubble that might collapse, and in the meantime might push up property prices.”

“This harms the ability of local citizens to improve their living conditions and it leads them to choose to emigrate to some other country, where it will be cheaper to live”.

Cilinskis however hinted at support for the economic development fund.

“We think that this payment may reduce total residency permit requests because of the extra expense but it is not fully clear how it will be used.”

But he added “Anyway it does not change what we think about the residency permits system as such.”

The budget, containing the new residency permit rules was submitted to the Latvian Saeima after BQ Baltic went to press. n

BUSINESS QUARTER | WINTER 14

ON THE RECORD

WINTER 14

Starter for ten, bus fleet deal signed, professionals given food for thought on key trends, rail plan on track, Estonian Air admits low flying moment, and aircraft makes maiden voyage >> Starter for ten Estonia construction giant Merko Ehitus group’s Latvian subsidiary SIA Merks has signed a contract with the municipality of Liepaja, in Latvia, for the construction of the multifunctional centre “Lielais Dzintars”.

Merks will build a 10-storey (including two underground) multifunctional centre with total gross area of 16,500 m2. The building will accommodate a 1,000-seat concert hall as well as number of other premises for various cultural events.

The contract value is €28.3m, with work scheduled for completion in July 2015.

>> Bourke on board Elections for the supervisory board of Reverta, the largest distressed assets manager in the Baltics, were held in August. Michael Bourke was re-elected as chairman, with new member Kaspars Abolins elected deputy chairman. Mary Ellen Collins and Andris Ozolins, another new member, will also serve on the board.

Reverta is tasked with loan restructuring, debt recovery and real estate management of assets taken over from the defunct Parex Bank. Its portfolio consists of debts in the Baltic and CIS countries (mostly Russia). Bourke said that “the amount of funds recovered so far, €450m, shows that our strategy has been chosen and decisions have been made correctly”.

>> Bus fleet deal Riga’s municipal public transport company Rigas Satiksme announced on September 12 that it will purchase 175 buses from the manufacturer Solaris for a total of €75.8m, news agency LETA reported. This will include 115 eighteen-metre buses and sixty twelvemetre buses, company CEO Leons Bemhens said. The new low-floor diesel buses will also be equipped with heating and air

BUSINESS QUARTER | WINTER 14

conditioning, security cameras and information displays. Four companies bid for the contract: Solaris from Poland, Germany’s Mercedes Benz, Italian-French-German joint venture Iveco and the Latvian company Amoplant.

>> Food for thought The Tallinn Food Fair (TFF), an internationally recognized networking event for food professionals covering a range of fields including hotels, restaurants and catering, retailers importers, and producers in the Baltic countries was held from October 30 – November 1.

Since 1993, TFF has become the main industry event for food professionals in Estonia and the Baltics. The trade show helps providers of food, food technologies and related services tap into new markets, meet new distributors or importers and create or maintain successful business contacts. Over 6,000 food professionals and trade visitors attended, discovering new consumer trends and networking.

>> Flying low Estonian Air was close to bankruptcy at the end of last year, former company council chairman Erkki Raasuke admitted in an interview in early October with the national television ETV. Raasuke recalled how airline managers were counting the days around year-end on when they would have to hand in a bankruptcy application. “First, we were losing money [rapidly]; we had ongoing disputes with plane suppliers. Then trade unions decided that conditions were not good enough. In addition, they told passengers that it wasn’t safe enough to fly on Estonian Air planes.”The airline is awaiting a European Commission state aid enquiry into permissible investment by the Estonian Government.

08

>> Logistics winners Logistics company Kuhne + Nagel won the Estonian Enterprise of the Year 2013 prize, awarded by Enterprise Estonia in October. The finalists were chosen based on economic performance, achievements and future expectations. The Entrepreneurship Award is the highest recognition by the state for companies and entrepreneurship. This was the 13th time the Enterprise Estonia contest has been held.

>> Rail plan on track Latvian, Lithuanian, Estonian, Finnish and Polish transport ministers on 16 September signed a joint declaration agreeing the basic principles for establishing a Rail Baltica 2 pan-Baltic railway joint venture project. The J-V will carry out the 1,435 millimeter European gauge – high-speed rail project, connecting the Baltics with Western Europe, “an important step for the Baltic States, Finland and Poland,” said Latvian Transport minister Anrijs Matiss. The project is important not only for the Baltic Sea region, but also as part of the Trans-European Transport Networks, he added.

>> Maiden voyage Latvian airline airBaltic said it was delighted by the results of the Bombardier CSeries aircraft’s maiden flight that took place at Mirabel, Canada on 16 September.

AirBaltic CEO Martin Gauss said: “We were very impressed. You could hardly hear the take-off of the new Bombardier CSeries aircraft. This was one of the reasons why we bought it, along with the cost savings from lower fuel burn.” The airline signed a firm order for up to 20 of the new aircraft in December 2012; which will be the foundation of it’s new fleet.

WINTER 14

ON THE RECORD

>> Out of the zone and into CCG Business development consultancy CCG has poached the former director of Kaunas Free Economic Zone to head a new in-country operation Ugne Unieziute has worked since 2002 promoting the economy of Lithuania’s second largest city as marketing manager and, since 2008, as marketing director.

She has been charged with producing and implementing a new strategy for the Baltic arm of British-owned CCG’s fast-growing global operation, with a remit to expand its geographical range as well as its portfolio of consultancy services.

Ms Unieziute (36), who is the first directorlevel appointment that CCG has made outside of the UK, told BQ Baltic: “I’ve had a long experience with the Kaunas Free Economic Zone, largely working with foreign direct investment projects, and I’m well aware of the many possibilities that Lithuania offers ambitious companies.

“With experience comes a natural desire to expand your activities, and I’m ready to enjoy new freedom to apply my skills throughout Lithuania and beyond.”

Unieziute said that CCG Baltic, which has offices in Kaunas and Riga, is considering reopening an office in Estonia, which was closed in 2005 following a strategic review. She said that she was looking for possible partnerships in Scandinavia to provide “bigger possibilities” to Baltic clients.

“As Scandinavian countries are among the leaders investing in Baltic States it would be a great opportunity to promote our countries with the help of local partners.”

Although close partners on many issues, Lithuania and Latvia often compete fiercely on attracting foreign direct investment. Unieziute said that while Latvia was naturally “less familiar” to her, she joked that they were “now both my countries”.

“Because of the comparisons that investors tend to make between us when considering the Baltics, I am very familiar with the strengths and weaknesses of both nations.

While Lithuania is sometimes seen as Western Europe-facing, and Latvia combines this with being a gateway to the Russian-speaking

world. There often tends to be healthy competition between offices of the same company in different countries.

“As the director for the Baltic States I can foster more collaboration between our offices and present all three Baltic countries to clients, offering them a better service. FDI is the main driver of economics in the region, and as a citizen of the Baltics I would like our region to grow.”

She added: “We are the experts in our countries. We speak the language, and we can open any door that needs to be opened. We are a small development agency, and because we’re small, we’re adaptable”.

“We’re not only looking to promote green field projects, but to show foreign companies that Lithuania and Latvia offer opportunities for cost savings.”

Charles Cormack, CCG’s founder and managing director said: “We appointed Ugne because we understand the need to develop our offering within the Baltics to Baltic-based companies and government agencies.

“We want to consolidate our position as a leading business development consultancy in the market, ready to challenge the Big Four [consultancies Ernst and Young, PwC, Deloitte and KPMG], and the obvious and logical step

09

was to appoint someone who had a proven track record of working at the highest level in and around economic and business development.”

“Over a long period Ugne has shown an ability to work effectively with companies that see the Baltics as a potential destination for trade and investment, having held a very senior position in one of the region’s most successful inward investment companies.

“We had many highly qualified candidates for this post, but she had exactly the mixture of drive, passion and detailed local knowledge we were looking for.

“We’re giving her the freedom to develop the strategy for business on the ground, she’s looking at expansion markets from the Baltic base.

“That includes Estonia where we have been before and she is also looking at relationships in Scandinavia, particularly Sweden.”

Founded in 2000, CCG has offices in Scotland, Lithuania, Latvia, Romania, Italy, Russia, India, Pakistan.

The Baltic offices are wholly owned by the UK company, which has a majority stake in partnerships in the other countries.

Services include providing internationalisation audits, providing market intelligence and facilitating market access, arranging trade missions and arranging outsourcing deals.

In 2012-13 the company’s turnover was £750,000, a figure expected to double to £1.5m in the current year.

A spokesman for the Lithuanian Embassy in London said: “This appointment is a significant development for CCG who we’ve had the pleasure to work with on trade promotion, education and R&D as well as in attracting investment to Lithuania.

“CCG‘s considerable contribution to organising the Lithuanian EU Presidency events in Edinburgh should also be noted as yet another successful venture implemented by the consultancy“. n

BUSINESS QUARTER | WINTER 14

COMPANY PROFILE

WINTER 14

Teesside University: Ready for business in the Baltic states We’re delighted to be featuring in this inaugural edition of BQ Baltic.

It’s particularly timely, as a senior team from Teesside spent a week in Latvia and Lithuania in early October, meeting with colleagues from over 20 universities and business and technology organisations to explore opportunities for collaboration.

The welcome we received from all our hosts was warm and positive, and together we have identified some very exciting prospects for joint working, ranging from student and staff exchanges and research collaborations to academic programmes and entrepreneurship initiatives that will deliver real benefit on both sides.

We are excited to be involved in such a dynamic, creative environment here in the Baltic states, where there is a real energy and sense of purpose.

It puts a real spark into partnership working.

The need for good links between universities and business is recognised at the highest government levels Based in the North East of England, Teesside University has around 24,000 students and enjoys a long tradition of working with and for business.

With five research institutes, programmes covering science and engineering, digital technologies, arts and media, health, management and social sciences, and a strong track record in enterprise and entrepreneurship, we are keen to work with like-minded organisations in the Baltic states to expand opportunities in both business and higher education.

The importance of higher education to innovation and economic growth has arguably never been greater than it is now. In a world where business is global, and growth and competitiveness are dependent on new talent, new knowledge and skills, new thinking and new ideas, the need for good links between universities and business is

BUSINESS QUARTER | WINTER 14

INVESTOR DAY FINALE FOR INTERNATIONAL ENTREPRENEURS

Teesside University campus

recognised at the highest government levels.

Those links enable the critical exchange of knowledge, which is the engine of the knowledgebased economy. They are the reason why Teesside University places such importance on working closely with business. Business connections prepare students with the soft and professional skills needed for the world of work, keep academic programmes current and relevant, ensure that research and development deliver to industry needs, and foster the entrepreneurial, can-do attitudes that drive new developments and new growth. This is why for Teesside University, partnership working is critical to success. In the case studies on these pages, we illustrate how that partnership approach is used to directly benefit business, how it informs our teaching, research and business work, and how we are shaping our contribution to the global knowledge-based economy in exciting and innovative ways.

We know we have much to learn and much to share and look forward to working with Baltic partners.

Contact us at business@tees.ac.uk or visit tees.ac.uk/business.

10

International teams of entrepreneurs who took part in a unique business accelerator programme at Teesside University marked its completion recently with an Investor Demo Day. The six teams from as far afield as Spain, Romania and Italy pitched ideas and products in front of nearly 100 investors and business leaders.

The 12-week Searchcamp programme saw the teams living and working on campus while they developed their products.

Searchcamp, a partnership between NorthEast investors and Teesside University, provided the start-ups with seed capital, intensive mentoring and workshops in return for a small equity stake.

The six teams have now developed marketready products which range from a social networking site for cats to a mobile dating app.

Professor Cliff Hardcastle, Deputy Vice-Chancellor (Research and Business Engagement), said, ‘Searchcamp is a reflection of the entrepreneurial spirit of this University. We’re always looking for opportunities to generate new businesses and this has been an amazing experience.’

Bobby Paterson, Programme Director for Searchcamp, added, ‘This has been an incredible learning experience for everybody involved. It’s very important that we work together to build a start-up ecosystem for the area.’

For more information on Searchcamp visit www.searchcamp.co.uk

WINTER 14

COMPANY PROFILE

Teesside University and Sainsbury’s join forces on £1million research project Researchers at Teesside University are joining forces with supermarket chain Sainsbury’s on a £1m project to find ways of cutting fat used in fried food. As well as improving efficiency and reducing carbon output, it could also result in healthier crisps and snacks. The University is using expertise in food science, chemistry and sustainable technology to optimise the management of oil in the production process, working with Sainsbury’s and supply chain companies.

The three-year project is part-funded by the Technology Strategy Board, a public body set up to accelerate economic growth by stimulating business-led innovation.

Victoria Yell, Sainsbury’s Technical Manager, said, ‘As well as increased efficiency and productivity, there is also going to be a health impact as there will be less oil used in the manufacture of the foods. I’m very confident that at the end of the three years we will have developed innovative ways to achieve our aims.’

Teesside University was chosen to collaborate with Sainsbury’s because of its proven experience working on similar projects. The research team will be led by Sustainable Technologies Project Manager Garry Evans.

Garry said, ‘Out of more than 1,600 applications,

(l-r) Oliver Perry, Rob Skene and Mike Lawrence

TECH ENTREPRENEURS AIMING TO HELP MORE STUDENTS FOLLOW IN THEIR FOOTSTEPS

Garry Evans (left) and Dr Jibin He

Teesside’s was one of 30 successful bids. We have the capacity and capability for delivering results.

We’re working in a market worth over £2 billion so even a small reduction in costs could have massive impact.’

$900,000 RESEARCH GRANT TO IMPROVE CONSTRUCTION PROCESSES IN QATAR Professor Nashwan Dawood has won a grant of nearly $900,000 to lead pioneering research which could save the Qatari economy billions of dollars in building costs. Professor Dawood and Dr Mohamad Kassem have been awarded the grant by the Qatar National Research Fund, to fund research into building information modelling (BIM) and its applications to construction processes in the Middle East state. BIM can cut the cost of building projects by up to 10%, potentially saving billions of dollars in Qatar which is predicted to spend $100 billion on construction for the 2022 Football World Cup. Professor Dawood leads the field in BIM which uses a whole life-cycle approach to track the cost, time, materials and execution space of building projects. His team has collaborated on projects all over the world to rehearse builds on major projects including bridges and gas rigs.

Professor Dawood said, ‘International competition for research grants in this area is extremely strong.

Qatar only works with elite institutions and this proves that our work is globally recognised.’

The research is a partnership between Teesside University and Qatar University. It forms part of Teesside’s work with Qatar University and German construction firm Hochtief-VICON to create a knowledge hub in the Middle East for BIM technology.

11

Two Teesside University graduates are hoping to use their experiences of setting up their own film and design company to help other students find their dream job. Yellow Snow Studio was founded six months ago by computer animation graduates Rob Skene and Mike Lawrence.

They’ve taken on Teesside University computer science student Oliver Perry, on placement as a lead programmer. The company’s product range includes promotional infographic adverts, music videos and animated web series.

Taking on Oliver allows them to handle more technical work such as web design and company re-branding. Mike said, ‘Everybody from the business community has been incredibly supportive. I think everybody remembers how hard it is and how high you have to climb.’

Mike and Rob intend to work alongside the University’s student initiative, entrepreneurs@ tees to help more people set up their own businesses. Yellow Snow is based in a start-up unit at Teesside University’s Victoria Building.

For more information on Yellow Snow Studio visit www.yellowsnowstudio.com.

For more information contact us at business@tees.ac.uk or visit tees.ac.uk/business.

BUSINESS QUARTER | WINTER 14

NEWS

WINTER 14

Meeting of makers, Euro chapter looming, half year hailed, taxing issues up for discussion, city gears up for culture title, Ireland and London links forged, and franchise hunters go shopping >> All at sea The 4th Annual Forum of the European Union Strategy for the Baltic Sea Region (EUSBSR) was held November 11-12 in Vilnius. The event, entitled “Baltic Sea, Baltic Growth, Baltic Environment,” will focus on the environmental challenges faced by the Baltic Sea region, and the potential to turn these challenges into opportunities for economic growth, competitiveness and job creation.

The aim is to make better use of the Baltic-wide perspectives offered by the EUSBSR, for greater benefit to the people living there. Ideas are now needed on how to support the Europe 2020 Strategy in achieving smart, sustainable and inclusive growth in the Baltic Sea region.

>> Red recognition A new initiative designed to validate the achievement of leading Latvian exporters has been launched in a joint venture by business and government bodies.

The ‘Red Jackets’ scheme is intended to give recognition and profile to the leading international brands from Latvia, and is aimed at “creating a story about the country and helping the exporting companies to tell it abroad”.

Red Jackets awards, along with the garment itself, have already been

BUSINESS QUARTER | WINTER 14

handed out to 25 enterprises recognised as leading Latvian brands. The enterprises comprise both large and SME businesses in a variety of sectors.

With a new set of awards due to be presented shortly, the selection in the first round earlier in the year was dominated by enterprises with high added value products such as chemicals and pharmaceuticals, with enterprises like Grindeks, Valmieras Stikla šķiedra and Madara Cosmetics, as well as electronics, textile, food and beverages, plus the logistics sector’s and the national carrier AirBaltic.

Jointly initiated by export consulting company GatewayBaltic, advertising agency DDB Latvia and brand agency MATKA, the scheme is now backed by the Latvian Chamber of Commerce, the Ministry of Economy, the Ministry of Foreign Affairs, Stockholm School of Economics (SSE) Riga and others.

The Red Jackets scheme promotes awareness of the value of brands through a bi-annual award to 25 Latvian companies with a successful record of exporting, plus a further award to the ‘Rising Stars of Latvia’ - a competition for smaller internationally-oriented companies.

The awards are based on sales pitch presentations before a panel of experts.

More than 50 companies from creative, technology and the food sector have already taken part in the competition, and 11 companies received the Rising Stars title and award together with a red vest “a symbol for them to strive for a red jacket in a couple of years”.

Alongside the awards themselves, the scheme also comprises seminars and conferences to develop skills, mentoring and networking programmes, and traineeship opportunities. The organisers also stage public discussions on the development of the Latvian export

12

brands and sessions on the obstacles and opportunities for export, as well as sectorbased discussions.

The aim is to make better use of Baltic-wide perspectives

>> Meeting of makers Innovators and engineers in Estonia’s strategically important, innovative industries will converge on Tallinn from 13-15 November for the 19th Tallinn international fair Instrutec 2013.

Attending industries include the machine, metal and appliance construction sectors.

Instrutec 2013 gives an overview of the present condition and development potential of Estonian metal, mechanical engineering, instrument-making, timber and sawmilling industries, and introduces the newest scientific, technical and technological advancements in the field.

Accelerating ideas.

Transforming markets.

Career development with Edinburgh Napier University Edinburgh Napier University and the Institute for Product Design and Manufacture deliver highly employable graduates and business solutions through research and professionally accredited training. The University is honoured to work with Klaipeda region, partner universities and companies in Lithuania.

Through 2014, Edinburgh Napier University is anticipating offering short courses in engineering, manufacturing, materials, forestry, ICT and business to support career learning and growth. In addition, Edinburgh Napier University offers online and blended learning programmes at degree and masters levels. These include: • MBA for Business, Life Sciences, Manufacturing or Engineering professionals • Product Design and Manufacture • Forestry products • Automation & Control • Materials Engineering • Sustainable Construction • Energy and the Environment • Technology entrepreneurship We look forward to working with you in 2014.

For more details and to register your interest, send an email to: ipdm@napier.ac.uk www.napier.ac.uk/ipdm

NEWS

WINTER 14

both Eastern neighbours and European countries which - outside the NordicBaltic region - had a limited experience of cooperation with the Baltic States in the past,” he said.

During its presidency, the first to be held by a Baltic nation, Lithuania’s agenda emphasised the strengthening of financial stability and increasing European competitiveness, as well as implementing the growth agenda. It also showcased the country’s skills as a negotiator and facilitator.

Lithuania will hand over the presidency to Greece in January.

Two years later, in January 2015 Latvia will become the second Baltic country to assume the chair, followed by Estonia in January 2018.

>> Euro chapter looming On 1 January Latvia gives up its currency, the lat, to adopt the euro, becoming the 18th member of the euro area. The ECOFIN Council on 9 July took the final decisions on euro adoption for Latvia and confirmed that the country was ready and would adopt the currency at the start of 2014. This decision culminates an approval process that began on 5 June with the adoption of the 2013 Convergence Report, in which the Commission concluded that Latvia fulfils all the necessary conditions to join the euro. The ministers set the conversion rate at 0.702804 Latvian lat to one euro.

>> Half year hailed Leading Lithuanian business figures have praised the country’s conduct of the six-month EU presidency, which ends on 1 January.

Dr Gediminas Rainys, vice president and director of the Lithuanian Confederation of Industrialists (LPK), the main organisation advocating on behalf of Lithuanian businesses told BQ Baltic that his organisation was satisfied with the economic focus of the presidency: “We’re quite happy with the negotiations and the events happening around the Lithuanian Presidency,” he said, adding that while he was “not expecting any immediate results” from Lithuania’s directorship of the rolling EU negotiations on trade, economic, environmental and social issues “everything is going in the right direction and nothing major seems to have been neglected.”

“Lithuania definitely gained a lot from this experience: our institutions became stronger, we are [now] more skilled negotiators, better in influencing the European agenda, and I can

BUSINESS QUARTER | WINTER 14

say that we succeeded in the difficult task of coordinating the opinions of 28 countries.”

“The LPK promoted the idea that Europe without manufacturing has no feasible future.

Therefore, the EU needs to be forward-looking and integrated in its industrial policy. We have been talking about it on the national level and of course during various EU meetings.

Key tasks for the Lithuanian presidency have been helping to secure agreement on the EU annual budget for 2014 as well as adopting legislation on neighbouring Latvia’s entry to the euro zone on 1 January, 2014. Also on the agenda has been the formal approval of the Council’s position on amending the EU budget for 2013, and covering outstanding payments amounting to 3.9bn euros in the areas such as cohesion policy, the EU term for support for economically disadvantaged areas.

The approval of Lithuania’s conduct in the chair, and its effect on the country’s standing, was endorsed by Professor Jean-Paul Larçon, vice-chairman for academic affairs at the Baltic Management Institute in Vilnius.

“The message has been very positive towards

14

>> Research study EU research ministers, at a meeting of the EU Competitiveness Council on 27 September, discussed the current progress of the Innovation Union and the European Research Area, as well as the possibilities for its acceleration.

The meeting was chaired by the Lithuanian Minister of Education and Science Dainius Pavalkis.

The Innovation Union aims include achieving the target of investing 3% of EU GDP in R&D by 2020, where it is hoped that this could create 3.7 million jobs.

It also hopes to increase annual GDP by €795bn by 2025.

The council was also presented with the new generation of public and private partnerships that will allow the carrying out of large-scale and long-term innovation activities under Horizon 2020, the EU’s next research framework programme.

>> Taxing issues discussed The RMS forum conference organisers will hold this year’s Audit, Taxes and Accounting 2013 meeting on 13 December.

This, its 16th international conference on the issues, brings together industry leaders to discuss the latest trends and developments.

Eversheds in the Baltics

Your trusted partner for quality legal services Eversheds offers a quality legal service across the Baltics. Our lawyers are practical, commercial and focused on building long term relationships with their clients. Expertise is combined with sector knowledge and innovative thinking to generate legal solutions that help you to achieve your goals, wherever you want to achieve them.

In addition to local experts based in the region, we have hundreds of lawyers around the globe who regularly work together in order to deliver complex projects. At all times, we think about how we can add value and unlock the opportunities for your organisation.

For more information contact us: Eversheds Ots&Co t: +372 622 9990 e: info@eversheds.ee www.eversheds.ee

Eversheds Bitans t: +371 6728 0102 e: birojs@eversheds.lv www.eversheds.lv

Eversheds Salad탑ius t: +370 5239 2391 e: law.firm@eversheds.lt www.eversheds.lt

NEWS

WINTER 14

and beyond, with this year more than 3,000 “purposeful buyers, potential partners and ICT professionals” expected to attend. Visitors gain insight into the latest Baltic ICT solutions and services and meet with potential business partners, suppliers and developers.

>> Credit failings

>> Fully booked Vilnius’ bookworms and publishers are getting ready for the 15th international Vilnius Book Fair, held on 20-23 February. It will highlight classical literature, with questions like - Is classical literature immortal? What does it mean to each of us? Do we understand the same books the same way? What are the topical problems we are looking for in classical literature? - highlighted in a discussion and seminar programme.

The Fair will be dedicated to the 300th anniversary of the birth of the most prominent Lithuanian author, and father of Lithuanian classical poetry, Kristijonas Donelaitis.

>> Growth culture Riga becomes European Capital of Culture 2014 on 1 January, with a full year ahead of activities ranging from concerts to theatre programmes, art exhibits and environmental projects. Early highlights include the Latvian National Opera’s performance of Wagner’s Rienzi (17-19 January), the Chain of Books (18 January) a human chain transferring books from the old to the new premises of the Latvia’s National Library. See p58 for more.

>> Tech event Riga Comm 2013, the ‘Information and communication technology fair and conference,’ will be held from 2224 November at the Kipsala International Exhibition Center. The fair brings together ICT professionals from around the Baltics

BUSINESS QUARTER | WINTER 14

Only 5% of Latvian companies currently meet the standard required to achieve the internationally recognised solvency certificate award CrefoCert, according to a company bringing the service to the Latvian Market.

Vladislavs Mejertals, Business Development Manager for SIA Creditreform Latvija Group, which claims to have issued 36 certificates since the company launched earlier this year said: “Solvency certificates have been wellknown around the world for the last decade but have only recently been available in Baltic countries. In Lithuania they have been given out to on average 1,000 companies per year. This year we have introduced CrefoCert to Latvia and during the first three months 36 companies have applied already and numbers are expected to grow up to 400 within the first year”.

Solvency certificates provide recognised, relevant and transparent confirmation of a company’s outstanding solvency to potential customers and business partners.

Promoters of the scheme claim that certificated companies bear lower risks of bankruptcy than average.

Mejertals said: “Such certification significantly reduces the complexity of potential partner evaluation and decisionmaking and serves as a positive factor for reputation of the company and might also help in marketing activities”.

SIA Creditreform Latvija, which was founded by Boriss Sabitovs and Maris Baidekalns, claims that that the service will benefit Latvian companies who are “struggling to quickly evaluate their potential partner’s reliability in business deals, as well as prove their own

16

financial stability to other national and international partners.” The company claims that, as certification is perfomed by an independent company its evaluation is “credible, accurate and professional”.

The award is based on a specific rating called CrefoScore, as well as analysis of a companies’ financial data.

The certificates, which are priced at a150 and a500 for standard and gold levels, are issued for a year, and are followed by daily monitoring and the prospect of cancellation if a firm’s “solvency situation” worsens.

CreFoScores are validated by the Creditreform International Group a credit management and debt collection company which operates through 172 offices based in 23 European countries. Founded in 1872 in Germany, it issues 10 million commercial reports a year.

>> EU gathering Lithuania will host the 3rd Eastern Partnership Summit in Vilnius on 28-29 November, the biggest multilateral political event during Lithuania’s six-month Presidency of the Council of the EU, and is one of the biggest EU foreign policy meetings this year. In all 28 representatives from EU member states and six Eastern partners - Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan - as well as EU representatives will meet in Vilnius. At the Summit the EU hopes to initial the Association Agreements with Armenia, Georgia and the Republic of Moldova, and sign the Association Agreement with Ukraine.

>> Travel showcase Tourest, the oldest travel exhibition in the Baltic States, is scheduled to take place in Tallinn on 14-16 February. This year’s record-breaking attendance 36,316 visitors during three days - is expected to be surpassed. Over 400 exhibitors representing tour operators, travel agencies, hotels, restaurants and others from around 25 countries give an overview of what the industry has to offer.

Published Published in English in English since since 1888, 1888, magazine magazine National National Geographic Geographic provides provides in-depth in-depth editorial editorial coverage coverage of cultures, of cultures, nature, nature, science science and and technology. technology.

The The magazine magazine reaches reaches moremore thanthan 80 million 80 million readers readers worldwide worldwide every every month. month.

In addition In addition to its to English its English edition, edition, the magazine the magazine currently currently appears appears in 39 in local 39 local language language editions. editions.

Subscribe 2014 and read Subscribe forfor 2014 and read in in Latvian, Estonian Lithuanian language!

Latvian, Estonian or or Lithuanian language!

DAVID DOUBILET / NATIONAL GEOGRAPHIC

DAVID DOUBILET / NATIONAL GEOGRAPHIC

Find more about Find outout more about usus in in www.nationalgeographic.lv www.nationalgeographic.lv www.national-geographic.ee www.national-geographic.ee www.nationalgeographic.lt www.nationalgeographic.lt

NEWS

WINTER 14

>> London calling Air Lituanica, the airline start-up aspiring to become Lithuania’s national carrier by 2015, is to add special Christmas and New Year flights to London and Dublin to help expatriate Lithuanians “celebrate with their families”.

The 48 extra flights, scheduled in partnership with charter airline Small Planet Airlines, will operate from Vilnius and Palanga airports, and are additional to the new carrier’s existing daily scheduled flights to Amsterdam, Brussels, Prague, Munich and Berlin.

A spokesman for the airline, whose maiden flight was in June this year, said: “During the main season holidays there is normally a sharp increase in the number of Lithuanian people from England and Ireland wishing to celebrate with their families back home. Moreover there are also locals who prefer to travel and spend their holidays with their families abroad.

That is why we decided to introduce these new Christmas holiday destinations which will enable our clients to reach each other during the holiday period.“ The new seasonal destinations are the first to be added by the airline since it launched the thrice-weekly Munich link in September, restoring a service between the Lithuanian capital and the regional capital of Bavaria that was

BUSINESS QUARTER | WINTER 14

discontinued three years previously. Air Lituanica, the first scheduled Lithuanian airline since FlyLAL and Star1 Airlines ceased operations in 2009 and 2010 respectively, was launched in time for the country’s assumption of the presidency of the council of the EU. It is majority owned (85%) by Vilnius Municipality, along with a consortium of local business figures.

The company’s fleet of two airplanes, an Embraer 170 and 171 which currently fly 21 routes a week to five destinations, is expected to expand to six by 2015. Future strategy involves carrying passengers on 13-16 direct routes of up to 2.5 hours long, in co-operation with 4-5 large partners on strategic routes, serving 600-700,000 passengers a year.

The Baltics are our first serious foray abroad

>> Franchise frenzy Over 500 prospective franchisees from Latvia and Lithuania are expected to gather in Vilnius and Riga in November for one of Europe’s largest franchise fairs.

For this year’s events in Vilnius on 27 November and Riga on the 29 November, organisers Advanced Advice, Lithuanian Franchise Centre and Lithuanian Business Employers’ Confederation have stated a goal of matching up to 40 franchise concepts with at least 500 prospective investors.

Speakers this year include Chris Jeffery, CEO and co-founder of online food ordering service ‘OrderUp’, which offers digital franchises, Svetlana Knyazeva, managing Partner at BRTG (Business ready to go) and Malkhaz Alasanya, executive director at ‘Franchise Academy’ and deputy general director at the Russian Franchise Association.

Exhibitors include Baskin and Robbins ice

18

cream, YoYo frozen yoghurt, Sbarro fast Italian food, and Capital Real Estate.

Now in its third year, Brand4Baltic is a showcase for the fast-growing sector. In previous years, 25% of attendees have been in retail, 33% in catering and 42% in service sectors. Of the attendees, 50% were senior managers and 25% are business owners or self-employed.

The November events are promoted throughout the Baltic states and Belarus. As well as providing a platform for international keynote speakers, Brand4Baltic provides a forum for “matchmaking” between international franchisers and local investors.

The event also has a record of generating media interest, with over 30 articles arising from previous events.

Nick Donald, Glasgow-based managing director of UK company Wildfire Technology Limited, which provides software for multilocation companies, including online manuals and operational customer relationship tools for the franchise sector, said: “Franchising is a new and growing market. I’m going to the show in Lithuania and Latvia as it’s an opportunity to break into new markets. The Baltics are our first serious foray abroad as I’ve heard very good things about these countries both in franchising and in R&D. “We expect the two events will provide a good picture of how franchising is growing in the Baltics. We will be presenting the benefits of our software systems, which are fantastic for start-ups and multinational companies going into new territory, so we see lots of opportunities to meet potential partners.”

A spokesman for Brand4Baltic said: “Two days and two venues will create an unprecedented franchising buzz, bridging franchisors with the common market of more than 15.7 million customers.”

I’ve heard very good things about these countries

Lithuania

The crossroad between North, East and West.

Building successful partnerships and bright futures.

Perfectly placing IT and Financial Services candidates throughout the Baltic region and Scandinavia.

brightpurple.co.uk @BrightPurpleR

brightpurple

Bright Purple Resourcing, Vilniaus str. 31, LT- 01402 Vilnius, Lithuania Tel: +37 0520 59318

AS I SEE IT

WINTER 14

Get back to where you once belonged Having returned from the UK to set up a business in her homeland, Latvian Julia Belkina argues the case for better measures to bring talent back to the country

BUSINESS QUARTER | WINTER 14

20

WINTER 14

Six years ago I returned to Latvia to found a creative learning company called Leika, after living and studying in Great Britain for five years. There was of course nothing unusual about my going abroad. Ever since Latvia joined the EU in 2004 young people have been leaving the country in their tens of thousands for destinations throughout Europe. Mostly, they have been moving to the UK and Ireland, to work, to study, to learn English or, in some cases, to get married and start families.

That was before 2008-2009. After the financial crisis struck, thousands more people moved to Western Europe simply to survive.

Ryanair must have made a fortune from transporting the Latvian workforce to wherever it was welcomed. Whether you spoke English or not, whether you had a profession or not, there was at least a chance of getting a job “over there”.

Professional dealings with Lithuania and Estonia have taught me that they too have been lured by opportunities, for example by the organisers of the London 2012 Olympics who offered chances that induced many in the Baltic states to pack their bags. Estonia seems to me to have suffered less than Latvia or Lithuania. In the latter’s case, the fact that Lithuanian communities in Britain are more organised and therefore resistant to inducements from home may be a factor.

We all have the same problem: how to bring people back?

Latvian Government officials tell us we are over the crisis now, supporting the point with a blizzard of statistics. We are even about to join the Eurozone, a momentous event for the nation.

But the problem we are left with as a result of the crisis is one of empty houses. It is worse in the smaller towns, but the capital Riga is affected as well. Official numbers confirm around 150,000 people have left the country now to seek better lives. Most of them have now been abroad for more than five years.

Think of what this absence means in terms of numbers of kids, schools, taxpayers, and pensions.

The Latvian Government, led by the Ministry of Economics, has now published an elaborate and detailed set of principles and programmes that, according to the plan, is intended to

We desperately need Europeanexperienced multilingual professionals

bring 2,400 people back by 2017. This would be a start, but it would hardly be a stampede.

I have played my part in this remigration drama. While I lived in the UK I was looking for ways to return home. Since returning in my early 20s, I have been involved in hiring people for a lot of different projects (engineers, HR managers, creative professionals) always with the intention of bringing one more person back to where they once belonged.

My opinion of the Government’s “action plan” is that it is too theoretical.

It gives the impression that its creators may have talked to people, who are looking to come back (the minister of economics Daniels Pavluts even went on a special tour of migrant destination countries) but I suspect that these officials have not had the direct experience of persuading a potential employee to return - or have themselves been in the position of someone thinking of returning and bringing their family with them.

In my mind remigration efforts should primarily be a dialogue between employers and potential employees. This will keep the focus on the real inducements. People will come back if there is work for the main breadwinner, if it were easier to find good schools, and if they are confident of good local medical support.

Government can facilitate things by reducing current market obstacles, not by creating additional rules for both sides of the dialogue.

Yes, returnees might need help with Russian language required by most Latvian employers, and will need accessible information about available positions. But mostly, people need to know that the pay is adequate (it would help to include pay levels in job ads) and that they

21

AS I SEE IT

will receive some additional benefits.

I believe that right now we desperately need European-experienced multilingual professionals, and frankly we might as well buy them in. If better incentives for both employees and employers were to be introduced, this, rather than elaborate government repatriation programmes, might speed up the process of return.

Every day I hear from friends and business partners that they are looking for colleagues with international experience to join their team. Unfortunately, most of them end up hiring locally, as they can't afford to invest the time and money on searching abroad.

As an example, I know one home maintenance start-up in Riga that is looking to hire a young professional in the service department. I also know there are young Latvians who have been working in a UK food processing factory for the past five years, sharing a house with eight other young guys from the Baltics, and looking for a comeback plan.

First of all our task is to match them up.

Secondly, we must help them relocate. A good idea might be to offer a so-called relocation package: a deal for apartment lease, financial help to set up an apartment and a bank account. For an employer it could be a tax discount for, say, a year if they hire someone who is relocating. You do the maths!

From what we can gather from the Lithuanian press their Government is more proactive than Latvia’s in bringing young professionals back, for example through the Talent Lithuania conference in April. But even if Lithuania is a bit ahead of its neighbours, the results are nothing to boast about. A lot of active work and economic development has to be done before we bring those Baltic neighbourhoods back. As a patriotic and proud Latvian I am ready to do my bit to help, at least by setting an example. I had a contract for a great job in the UK, but I chose to build my career, start my family and bring up my kids here, at home. n Julia Belkina is head of marketing and communications for the construction, production and property development holding company LNK Group in Riga and founder of the training and development network Leika.

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

History Man

Latvian Prime Minister Valdis Dombrovskis has overseen a rapid restructuring of a stricken economy and geared it towards production and export-led growth. Colin Donald met the premier ahead of his nation’s momentous switch to the Euro

The Prime Minister of the Republic of Latvia is a plain dealer who shuns the PR hype surrounding most European leaders, but earlier this year his aides thought that a fanfare was in order.

In August, they issued a statement to celebrate the accession of Valdis Dombrovskis as the

BUSINESS QUARTER | WINTER 14

country’s longest-serving democratically elected prime minister, his 1,633 days in the job surpassing the premiership of Ivars Godmanis (1990-1993). The statement praised the “sound financial management and reforms which have re-structured the economy to develop production and exports”.

“Latvia has had the highest growth rate of the economy in the European Union for two consecutive years.” It continued. “An economy based on real estate deals and consumption [has been] replaced by a production and exportdriven economy.”

But the crowning argument for Dombroskis as history-maker, the statement concluded, was his “attainment of the criteria set out in the Maastricht Treaty and accession to the eurozone”.

The PM’s main legacy, it was suggested, will live on in the wallets and purses of Latvians from 1 January next year, when citizens start to trade in the same coinage as fellow-

22

Europeans from Estonia to the Algarve.

It is typical of Dombrovskis to headline an achievement that he believed was necessary rather than popular.

Because Euro accession is not popular. A sizeable majority of Latvians remain uneasy about abandoning their currency the Lats, the post-Soviet banknotes watermarked with Milda, the legendary maiden who personifies the nation’s hard-won independence.

Given the disasters that have threatened the European currency, this was a courageous choice. Finessing all the complexities to make it happen is among the most extraordinary feats of leadership of Latvia’s battle-hardened 44-year-old premier.

With Latvia on the verge of the big switch, BQ met Valdis Dombrovskis in his pine-lined study in the state chancellery in Riga, to discuss what he calls the “why and the how” of his coalition government’s momentous decision to throw in its lot with the Euro. >>

WINTER 14

INTERVIEW

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

Necessary steps: Valdis Dombrovskis believes Latvia’s shift to the Euro is a must, despite the decision proving unpopular in some quarters.

BUSINESS QUARTER | WINTER 14

24

WINTER 14

“For business I would say [Euro accession] is mainly a winning situation, also for consumers.

We are a small and open economy, we do about 70% of our foreign trade in Euros, it means that we are spending lots of money in currency conversion, and all those currency conversion costs [estimated at an annual €70m] will disappear.”

“Also joining the eurozone will bring lower interest rates, in fact some accrediting agencies have indicated that they will be improving our credit rating, as they see joining the Eurozone as a positive factor.”

Dombrovskis is also warning Latvian businesses not to exploit the complexities of the switch at the expense of the consumer. The switch will involve a two week period of “parallel pricing” in which both currencies are acceptable (with change given in Euros), followed by a three month period in which Lats can be exchanged for Euros at post offices and banks. In a folksy reassurance, he says that if in the future “renovation or relocation” they discover a forgotten horde of Lats, these can be exchanged at the Bank of Latvia “with no time limit”.

Popular opposition is strongest among older, especially Russian-speaking parts of the population, where people have lost out in previous currency switches. They are less inclined to value the benefits of a European currency – and suspicious of the politicalbusiness elites who extol them. Latvian nationalists are also wary.

“We have already signed – and now it’s open for businesses to join – an agreement on the fair introduction of the Euro where businesses commit to changing prices according to the existing exchange rate and will also not make any manipulations with the rates.

“I would say business is quite positive about this initiative. We are doing it together with the Employers Federation and the Chamber of Commerce and already a number of important businesses have signed, for example the Food Traders Association, which contains the main supermarket chains and two oil products traders organisations which cover almost all filling stations and so on and so on.”

The real “risks” for business in the switch, he says, deftly lining up his government on the side of ordinary Latvians, is a reputational risk

for businesses themselves, should they be caught trying to pick the peoples’ pockets.

“As agreed by Ecofin [the EU financial directorate] - the exchange rate according to which rate Latvia will join the Eurozone - 0.702804 Lats is one euro” he says.

Characteristically he recites the decimal points from memory.

“Of course in a market economy, the state does not regulate prices, so [adapting the agreed exchange rate] is voluntary, but we will be more or less naming and shaming companies who do not comply, and also during this transition period both the Consumer Protection Centre, and Competition Council will also work intensively to check that there is no manipulation.“ But far more significant in Latvia’s debate over the Euro than the prospect of being done out of a few centimes on a bag of tomatoes or a tank of petrol, is the prospect of Latvians being required to participate in the possible future bail-out of one of the Eurozone’s stricken giants. Dombrovskis has priced in this scenario.

“The real risk in joining the Euro is for the state.

It’s not so much a risk, it’s more an expense, the sense that we will have to contribute to the European Stability Mechanism, and that’s certainly an expense to the state which we have calculated. When we were communicating this reasoning of joining the Euro we also showed this expense, but showed it being offset by all the positive factors through more investment in Latvia, reduced currency costs, and lower interest rates. Those positives far outweigh the cost of our contribution to the ESM.” After all that has occurred to undermine the credibility of the European currency, Valdis Dombrovskis is arguably the only living politician capable of selling a policy of Euro entry as a safe, sensible option.

INTERVIEW

Presenting himself as a solid technocrat, who has risen above the squabbling and shorttermism of Latvian politics to lead a right-ofcentre coalition of Unity, Reform and National Alliance parties, Dombrovskis’ political longevity stems from his formidable horse-trading skills, and phlegmatic, somewhat dour, practicality which made him the right man at the right time in Latvian history.

A trained physicist as well as an economist, his dogged ability to analyse and prioritise problems, plough through obstacles and blank out criticism have been recognised. He has his critics, but none have convinced Latvians that they could have handled economic disaster more competently: “If you have as deep an economic crisis as we had in 2008-2009 there is no easy way out,” Dombrovskis tells me. “So if anyone wants to criticise something, there will always be something to criticise, that is quite clear.”

This of course was no ordinary crisis. Latvia suffered the worst financial crash in Europe in the 2008-9 crisis, with 18% of GDP being wiped out, necessitating a 7.5bn international loan. After brutal austerity, which accelerated the country’s perennial net emigration crisis (now slowed but by no means stopped), Latvia is now, at 4.1%, the fastest growing country on the continent.

It is a remarkable turnaround, all the sweeter to the PM for having been accomplished in defiance of the international commentariat, led by the influential US professor Paul Krugman, who insisted that Latvia must devalue its currency rather than conduct an internal devaluation. The professor has not taken kindly to the Baltic resurgence that has occurred in defiance of his Keynsian theorising.

Dombrovskis, whose evenness of tone and temper can verge on the monotonous, >>

If you have as deep an economic crisis as we had in 2008-2009 there is no easy way out

25

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

comes closest to displaying real animation when talking about Prof Krugman, who notoriously described Latvia as “the new Argentina” destined for bankruptcy. The Latvia v Krugman prize fight looks set to continue for a few more rounds.

“It’s quite clear that Paul Krugman was wrong about Latvia’s economy” Dombrovskis says.

“He was wrong since he first start to commentate in 2008 and has not been able to accept that he was wrong. Instead he keeps looking for what is wrong with Latvia!”

“If you look at his economic analysis, it’s either flawed or unfair. He takes Latvia’s precrisis trend and says that because economic development did not continue in the pre-crisis trend, Latvia’s economy should be so much bigger than it actually is.

“But the big question is if Latvia’s economic trends were sustainable during the pre-crisis levels [Latvia grew by 12% in 2006]. The amount of credit in the economy between 2005-2008 increased four times and the current account deficit rose to more than 20% of GDP, there was a huge real estate bubble, a construction boom, with double digit inflation and despite double-digit growth an unbalanced budget and so on. It takes a big effort to describe this as sustainable development. It was clear this was a bubble and that it was a bubble that burst.

“So if someone looks at the peak of this and then says that ‘if you continued like this you would be much higher than we are now’, it’s just the wrong way of thinking about economic development.

“Krugman seems to be trying to deny that Latvia’s economy was overheated before the crisis and that’s something again so obvious that I would find very few economists who would argue it. The IMF for example said it was overheated by 10% of our potential output.

So if you have 10% of GDP fall, you are just at the potential before the bubble.

But now we have had more than 20% fall, and we have had more than 10% increase, and now we see our economy at more or less its potential and starting to grow slowly above that.”

To some critics, such re-fighting of controversial crisis-era decisions helps make the case for a fresh chapter to be opened for a new phase

BUSINESS QUARTER | WINTER 14

in Latvia’s recovery. They consider the PM a political artist and compromiser more adept at preserving the coalition who would prefer to delay than instigate the growth policies necessary for growth. To these reluctant critics, the Dombrovskis regime is past its sell-by date.

Latvian politics are notoriously unpredictable, with new parties tending to spring up shortly before elections, so it may be that others will appear next year to build on his Euro accession legacy. As things stand, the lack of convincing alternatives, and perhaps vestigial gratitude for his calm in the eye of the storm, give Dombrovskis a decent chance of being re-elected in October 2014.

“Dombrovskis is not a charismatic leader, and he knows it” one of his cabinet colleagues tells BQ. “But Latvia has had charismatic politicians in the past who have turned out to be scandalous in one way or another. He has focused on seeing through Euro accession first, then on getting through each month of political upheaval.”

Naturally the PM doesn’t agree with the charge that he is running out of steam pointing to the Government’s National Development Plan, a 30-page, seven-year routemap to “economic breakthrough”, built around the triple themes of developing and retaining human capital, transforming the economy, and developing Latvia’s regions.

Typical of Dombrovskis, critics say, when asked for a national vision, to point to a turgid bureaucratic paper designed to draw down EU cash. Yes, say his supporters, but it was the “visions” of the leaders who screwed up the country in the last decade that led Latvia to near-ruin. Better a prime minister who fixes problems rather than one who inspires visions.

Even if Dombroskis may not be the best front man of the drive to make the Latvian economy more competitive, although he is prepared to try new initiatives, such as the convening of a ‘Latvian Davos’ in Riga earlier this year, in which expatriate leaders offered solutions to the country’s intractable problems.

Meanwhile he is set on reducing labour taxation, tidying up the delay-prone legal framework that deters overseas investment, matching skills and the education system with the labour market, and tackling the “huge demographic problem” of a nation that has seen a steady exodus of young, educated Latvians during its lifetime, a trend which accelerated sharply in the recent crisis.

“Quite clearly all indications are that we are heading towards a serious labour shortage, and its going to affect aspects of our economic development. It is also clear that not all our people will return, and we have to find a way to work with those people to use their potential for the benefit of Latvia. The idea of the ‘Latvian Davos’ – you can take that title with a pinch of salt – was to bring business leaders from across the world to seek synergies themselves and mix with Latvian business to see what they can do, also how they can help Latvian economic development. We want this to be a regular event, it’s an excellent initiative and should be followed up.”

“We need to work in both directions. One thing is the immigration plan which I see still as a supplementary instrument linked with general economic development and job creation.

“We are trying to create specific incentives for people to return, which they will if there are decent jobs waiting for them. One of the ideas

It’s quite clear that Paul Krugman was wrong about Latvia’s economy...He was not able to accept he was wrong and he keeps looking for what is wrong with Latvia

26

WINTER 14

Youth no barrier for this Riga riser Although extraordinary by international standards, the rapid rise of the still-youthful Mr Dombrovskis is slightly less unusual in Latvia. A country with two million inhabitants, a political landscape marked by ethnic divisions and, on the Latvian-speaking, rapidly-changing small parties, where younger, Western-educated politicians easily achieve rapid promotion.

Born in Riga to a family with Polish roots, Dombrovskis was one of the smartest of a generation of young technocrats, trained in physics and economics in Germany and the US. After rising to chief economist at the Bank of Latvia, he was tapped by his political mentor Einars Repse, founder of the centre right New Era party, to be finance minister at the astonishingly young age of 31, serving in that role for 16 months. In 2004, he moved to Brussels where he spent five years as an MEP. Absence from the scene during Latvia’s ill-fated “Baltic tiger” bubble period was to prove a boon when in March 2009 he was persuaded to give up the relatively cushy (and better paid) job to be drafted in to lead the coalition in its darkest peacetime hour. Few at the time expected him to achieve the dominance he ultimately has.

Nicknamed “teddy bear” by a lady MP in a possibly ironic comment on his somewhat stiff public persona, he has nevertheless proved an effective communicator, remaining ‘on message’ while bulldozing his way through any opposition to his plans. Intensely private – his wife rarely appears in public – he has a reputation for scrupulous honesty and frugality in a country where oligarchic influence has made the public cynical about politics and politicians.

The prime minister’s skill set allowed him to pilot Latvia through the crisis, executing the hugely painful IMF-dictated prescription for national recovery with brutal clarity and focus. He even found time to co-author a book about the experience - How Latvia Came Through the Financial Crisis - alongside Swedish economist Anders Aslund.

27

INTERVIEW

is that we should advertise job opportunities in Latvian throughout the diaspora, and see if they are interested in taking up those jobs.”

On the subject of job prospects, I ask Dombrovskis if he intends to emulate the British prime minister, Margaret Thatcher, who famously declared that she would “go on and on” when the electorate started to go cool on her.

Predictably, the PM replies, that his future is “in the hands of the voters”, and that he “doesn’t exclude the possibility of running again, and if the people decide [to re-elect me] I will continue”.

But he then makes a revealing comment.

“There has been some speculation about some EU position and that remains to be seen”.

As it is unusual for a serving politician even to hint at an interest in another job, this may be the clearest sign to date that ambitions lie beyond Latvia, perhaps in Brussels, where he served as an MEP from 2004-2009.

Despite the immediate modest qualification that he “doesn’t think it’s a very high probability”, raising the question unprompted is a politician’s way of throwing his hat in the ring.

BQ takes this as a confirmation of sorts, though it is not clear as to whether the role he sees himself is a commissioner, or even as a compromise candidate to succeed EU President Jose Manuel Barroso.

Why not? Being from a small member country can be an advantage in Brussels power-politics.

In Dombrovskis’ case, his record in office and his international reputation place him in the frame.

This impression of a young prime minister pitching for a second career is not dispelled by his orthodox pro-Brussels hard line on the ‘impracticality’ of repatriation of powers and other checks on the increased power of EU institutions. As a government press release tacitly pointed out, Dombrovskis is a great survivor.

After all the shocks and disappointments that accompanied the great crash of 2008, anyone who values political courage, competence and determination to mend a broken system will be happy to see Latvia’s history man on a wider stage, tackling a wider set of problems. n

BUSINESS QUARTER | WINTER 14

ENTREPRENEUR

WINTER 14

all hail the linen queen

BUSINESS QUARTER | WINTER 14

28

WINTER 14

ENTREPRENEUR

Traditional values and digital nous have sped Inga Lukauskiene’s emerging fabric empire to global success, as Linas Jegelevicius discovers

It’s a formula made in business heaven: a luxury product steeped in history and tradition, sold to the world via state-of-theart e-commerce and B2B channels. Inga Lukauskiene, founder of Lithuania’s online fabric shop LinenMe has done just that.

The firm Linomeda, which processes and wholesales linen products for some of the world’s best known stores as well as selling branded goods over its fast-growing LinenMe website, is arguably doing as much to promote the ‘Made in Lithuania’ quality marque as the nation’s development agency.

How did she do it? Linen, made since ancient times from the woven fibres of the flax plant has been a speciality of northeastern Europe, with some of the world’s best quality flax growing in Lithuania, Latvia and Belarus. In Soviet times, Lithuanian factories churned out sheets and pillowcases for the entire USSR. All of this history might have stayed history, had it not been for Inga, whose family were steeped in the linen trade and whose mother worked in one of these Soviet-era factories. The girl, who grew up selling flowers from her father’s horticulture business at Saturday markets and was known as the ‘queen of roses’, is now the undisputed queen of Baltic textiles.

“Actually, the very beginning of the company goes quite far back in history,

to the roots of the re-establishment of Lithuania’s independence when my parents, living in the Plunge [pronounced Plun-gay] district in northwestern Lithuania, started a linen production company, Linomeda.

“Before the dawn of independence, when my mother still worked as a production manager at the state company Linu Audiniai, one of the oldest linen-processing factories in the country, a trickle of foreigners started to become aware of the fabric.

“In 1992, a Danish businessman walked in and handed my mother a fancy handmade napkin, asking her whether the factory could copy it. Nobody wanted the job because they were interested in the production of simple sewing items, but my mother brought the napkin home and the next day took it to our neighbour who taught handiwork. She agreed to hem-stitch other napkins, a job that took her a couple of days. He left very happy with the quality and wanted to continue the collaboration. I remember at first we made 12, then 24 table napkins.

“The second client we had was a Swedish woman. But the word about our linen embroidery was out there, and the trickle of customers has eventually turned into a stream.”

Still a schoolgirl, Inga would help the family cope with increasing orders. “We opened >>

A Danish businessman walked in and handed my mother a fancy handmade napkin, asking her whether the factory could copy it

29

BUSINESS QUARTER | WINTER 14

ENTREPRENEUR

WINTER 14

It’s all about work and only work. I really don’t count my working hours. Frankly, this upsets my children, but I tell them that LinenMe is my third child...

a sewing shop in our living room and started hiring seamstresses. It is funny to remember now that in the beginning the sketches were cut and ironed on the kitchen table.

It was then that my mother and I focused on business marketing and participating in exhibitions. Now all our family members - my parents and sisters - were involved.”

With sales of around €2.5m euros from both LinenMe and Linomeda, Inga deals with clients, product designing, marketing and sales. For about quarter of the year she is attending trade exhibitions from New York to Tokyo. The rest of her working time is spent overseeing production and web sales.

In 2007, realising that it would be very hard to launch an international business from Lithuania “which, frankly, still is unchartered country for many people” Inga moved with her family – husband, a daughter and son – to the UK, and “hunkered down” in southwest London. Previously she had studied at the KLC School of Design in London’s upmarket Chelsea district, “I took several boxes filled with linen products.

The website for the start-up LinenMe had already been created and I just needed to do some updates upon arrival in London.”From there she would work on design with clients before sending sketches to the production line in Plunge.

“When we started selling online, our customers doubted whether orders in Lithuania can be fulfilled in time and properly.

So for the purposes of burnishing the trademark, it made sense to relate it to a company operating out of the UK.” Deciding to sell directly online was a stroke of inspiration, and a great illustration of the transformative power of e-commerce.

“I didn’t like the idea that we do the hardest

BUSINESS QUARTER | WINTER 14

work and the foreign customer just puts their label on our linen article and sells it for a whole lot more. Therefore, some six years ago, we decided to launch our own trademark”.

As any e-commerce specialist will tell you, creating a successful site requires huge investment in time and resource.

“At the same time, weaknesses in the backup needed in areas such as search engine optimisation and order fulfilment cause the vast majority of sites to fail. For those that succeed, the rewards are slow to arrive. The LinenMe site inspired many imitators, but none survived.

“I chose e-commerce because of the lower costs [than traditional retail], and the vast reachability online commerce gives. We signed up with eBay at first, though many were very skeptical about the decision. In the early days, eBay was deemed a second-hand e-shop, and people thought we were putting the new trademark at risk. But the risk has paid off.

“We had to consider everything to be sure the business could take off, even feedback on e-Bay and Amazon, which we took very seriously. In pursuit of nicer online comments, we bent over backwards to please customers – organising one-pound online auctions for handmade sophisticated linen embroidery, for example.

“We’d exerted lots of effort before nailing down the very first order on our website. In fact, we got it eight months after the site was launched.”

LinenMe now ships linen garments, bedding and household items (towels are the bestsellers) to over 50 countries worldwide.

No fewer than 8,000 parcels were sent out last year from the firm’s fulfilment centre in Plunge, part of an operation that employs 80 workers.

30

From Plunge, LinenMe is being dispatched as far as Chile, Brazil, New Zealand, Singapore and Japan where the ‘Made In Lithuania’ trademark is increasingly valued. The Japanese, are obsessively ecology-conscious as well as quality-fixated and know authenticity when they see it. Five people, including Lukauskiene, are engaged in marketing, sales and customer support.

“I reckon the secrets of our success are having a trustworthy supplier – my own family in Plunge. Secondly, having the articles handmade. Even if we use some machines for some more serial production, every item still passes through our hands. And, thirdly, the flexibility we have. Without exaggeration, we can fulfill an order in a matter of days.”

By any standards, the firm’s achievments are impressive after only six years in business.

Inga grins: “It’s all about work and only work.

I really don’t count my working hours. Frankly, this upsets my children, but I tell them that LinenMe is my third child and their sibling, so they ought to be considerate towards it.”

A German-language site has just been launched, along with other language options on eBay and Amazon sites.

Ironically Russia, once the main market for Lithuanian linen, barely features in the firm’s plans. “Today’s Russians tend to like luxury items, often dazzling and shiny stuff" Inga explains, "Not linen.”

Likewise the home market has yet to catch on to the quality cues that dominate LinenMe’s marketing material.

“My compatriots expect linen products to be cheap, and that is not always the case,” she says. In fact over 95% of the firm’s output is exported.

“It cannot have hurt the business that, in person, Inga Lukauskiene is warm >>

WINTER 14

ENTREPRENEUR

Seamless success: LinenMe ships items to over 50 countries worldwide, with 8,000 parcels sent out last year from the firm’s base

31

BUSINESS QUARTER | WINTER 14

ENTREPRENEUR

WINTER 14

We strive to unleash the creativity of our customers

A lady in love with linen Listen to Inga Lukauskiene wax lyrical about linen’s “soothing, calming effect, coalescing with nature itself” and you will quickly be convinced of the semi-magical powers she ascribes to the fabric.

One of its chief qualities, she says, is durability: “Linen items are known for their longevity. We try to encourage the inter-generational sentiment, allowing young family members to replicate items that their ancestors enjoyed.”

The first rule of business is to know your customer. “Someone from the middle or upper middle class who are fond of embellishing their home, someone who values product quality, longevity, handmade work and is ecology conscious.”

She herself is a walking advertisement for the products, and is usually decked out in a crisp linen dress.

“All our family, my husband Paulius, my nine-year-old daughter Ruta and 10-year-old son Mindaugas love wearing linen clothes. Frankly, when I get into a hotel room abroad with bedding other than linen, I don’t feel very good about it.”

LinenMe is using customer interaction to weave more value into its range, including a recent website feature called “Your Story Told In Linen”. Inga explains: “We aim to put more focus on personalised items.

“Having our own manufacturing and more than 300 fabrics in stock, we strive to unleash the creativity of our customers and therefore have asked them to come up with some catchy phrases which would be a source of inspiration and, at the same time, would fit the LinenMe brand’s personality. We carry out these kinds of competition for our customers every month.”

BUSINESS QUARTER | WINTER 14

32

and charming and far from the stereotype of a strict and assertive ‘Dragons Den’ businesswoman.

But Inga downplays the contribution of her personality “Frankly, I see myself as a pretty introverted kind of person. I prefer listening over talking.

“But I am hard-working and principled and I seek to give 100% to the business. I am happy mingling and networking with other businesswomen all over the world.”

Where then does LinenMe go from here? Inga is targeting 20% growth in the online business in what has been a turbocharged year. “That’s not a figure plucked from the sky, it’s based on past performance.”

In the meantime the company’s offer continues to make inroads as buyers in search of quality shift their attention from established Western European brands, most prominently the Belgian firm Libeco.

LinenMe also has a wary eye on Chinese competitors, whose access to cheap (lower quality) flax makes them unattractive to discerning linen-fans for now, but the Chinese ability to move up the value chain, imitate and improve value is rightly to be feared.

Although too industrious to ever be complacent, for the time being Inga is enjoying her reign over a sweet spot in a global textiles industry where high quality and competitive price overlap.

The girl who grew up growing and selling roses, is seeing her carefully nurtured enterprise achieve spectacular bloom. n

WINTER 13

33

XXXXXXX

BUSINESS QUARTER | WINTER 13

COMMERCIAL PROPERTY

WINTER 14

A sure sign of the recovering real estate market is a growing appetite for newly developed residential projects. Mantas Umbrasas, sales manager of MG Valda, a Lithuanian real estate management company based in Vilnius, notes that consumers are becoming “increasingly picky”, in seeking out high-quality housing that meets contemporary needs and that will remain a sound investment in the future. This positive picture of continued recovery in the sector is confirmed by other real estate developers across the Baltics. Here we feature a selection of projects, both commercial and residential This project will also use different environmentally friendly technologies: rain water accumulated in reservoirs will be used for garden maintenance and windows with sun-control film will help control the light flow on the hottest summer days.

declining amount of vacant premises and the increase of rent prices, providing better profitability to investors than in previous years. Investment opportunities are actively being sought out by investors from Russia and other CIS countries, who, unlike their counterparts in many European countries, have funds available, including bank financing on comparatively favourable terms. Entrepreneurs from Estonia are also increasingly showing interest in purchasing commercial properties in Latvia.”

>> BeržuųTerasos – sustainable development set in an exclusive environment Antakalnio Terasos is a complex of residential houses efficiently combining the advantages of nature and the conveniences of a modern city.

The first stage of 181 apartments has been successfully completed and sold out. The second stage, called BeržuųTerasos, and located in Antakalnis district of Vilnius, is scheduled for completion in mid-2014; it is based on the principles of sustainable construction with special attention to preserving the unique natural environment.

BeržuųTerasos fits into the natural landscape and the surrounding grove of mature birches that will please the eyes of residents with views of the changing seasons.

The houses are constructed of organic, natural and specifically durable construction materials that ensure highenergy efficiency of the heat insulation and engineering installations facilitating significant savings of energy resources and reducing environmental pollution.

BUSINESS QUARTER | WINTER 14

>> Sale of entertainment center Vernisaža in Riga In a major deal, real estate company Latio has brokered the sale of entertainment center Vernisaža at 2 Terbatas Street, Riga. The property was purchased for LVL 6.7m by a group of investors from Russia. Latio Commercial Property sales department manager Janis Šins underlines that the new owners of the complex intend to retain its current function – after renovation and modernization of the premises, various types of tenants will be engaged to offer visitors of the centre opportunities to enjoy the complex’s nightclub, restaurant, cafe, and cabaret. “We’re currently seeing growing interest of investors from various countries in purchasing high-quality cash flow properties in downtown Riga,” says Šins. “This trend is stimulated by the

34

>> Avala district – creating a working environment for knowledge-based enterpises in Estonia One of the biggest new starts in the Estonian commercial property market is Avala business district, developed by Kaamos Group. The 10 hectare district is in the vicinity of the city centre. Its focus on global clients makes the close proximity of the airport relevant – it is a three-minute drive away.

The buildings have views of Lake Ülemiste on one side, and the city and sea on the other.

Avala is positioned at the hub of technological development and is forward looking, in

WINTER 14

tune with Estonia’s status as a pioneer in the progress of information technology in Europe.

“Avala is designed to unite open minded, innovative and knowledge-based enterprises,” says Priit Uustulnd, the member of the board at Kaamos Kinnisvara AS.

>> Sustainable office buildings and residential complexes in Estonia Major completed projects in Estonia this year include the Office of Statistics Estonia at Tatari 51 in Tallinn, with over 4,800 sq m office space in a contemporary sustainable office building, and the logistics centre for AS Tridens - one of the biggest importers and wholesalers in Estonia. In both projects Tallinn-based Kaamos Group acted as investor, developer and constructor.

Kaamos has also been very active in the residential market, starting sales in two residential projects at Soo street 40 and on Pärnu mnt 104a. Both buildings satisfy Tallinners’ demands for quiet, green yet central living space. The exterior of the building has been designed keeping to the style of modern Scandinavian residential architecture.

>> New A-class business centre planned in Vilnius In 2015 a new mixed-use office/residential complex is planned to appear in Zalgirio

COMMERCIAL PROPERTY

Street, Vilnius, developed by Lithuanian real estate developer EIKA. This complex is designed as an A class business centre, shopping mall and apartments with a total of 16,000 sq m. The building is divided into a 5,000 sq m office centre, 2,800 sq m shopping area, two nine-floor 120 apartment buildings and two-level underground parking with 347 spaces. The complex will be centrally located and will have a convenient access by private and public transport from all parts of Vilnius. A modern engineering system will be installed there, including a ‘building management system’ (BMS). The complex is designed as an energy-efficient building with low operating costs and low environmental impact. “The business centre will be exceptional for the unique architecture, exclusive interior and public areas with a winter garden”, claims Vitalija Roce, EIKA’s marketing and communications manager.

landscaping will enhance its marketability as a quiet family retreat.

Light House is equipped with a range of modern technologies, including a threeway security programme, IP surveillance cameras and smart energy-saving options.

Residents will be able to adjust the heating in their flats by remotely accessing the system from any place in the world.

Each apartment will have an automated data reader from utilities or ‘smart metering’ equipment.

>> Award-winning residential projects in Lithuania

>> LightHouse – a new approach to the quality of life LightHouse is a complex of upmarket residential houses created by MG Valda.

The complex is in a convenient location between the Šeškine and Fabijoniškes residential districts of Vilnius. The Old Town of Vilnius and the centre of the city are just ten minutes away. Kindergartens, schools, restaurants and public transport stops are all nearby.

The first three houses are complete, with further development of the surrounding territory in prospect. The grounds will be equipped with sports equipment suitable for both adults and children, and further

35

Since 2007 the Lithuanian real estate developer EIKA has been developing a new residential settlement in Pilaite, Vilnius, which was voted the best residential project in Lithuania in 2011 by the financial market publication Euromoney.

Currently, EIKA is in the process of constructing an apartment house, multistorey parking building and a new 5,000 sq m shopping centre, scheduled to open in 2015.

In total, an additional 250 new apartments will appear in Pilaite by 2015.

Another residential settlement which is nearing its completion is Santariškiu namai, where new semi-detached houses powered by renewable solar energy won a gold medal in the competition, Lithuanian Product of the Year 2012, run by the Lithunian Confederation of Industrialists. The project is also developed

by EIKA. By 2015, another 200 new apartments, and a shopping and service centre will be built, along with the completion of entire Santariškiu settlement.

A total of 1,150 families are expected to live in Santariškiu namai.

BUSINESS QUARTER | WINTER 14

BUSINESS QUARTER | WINTER 14

36

WINTER 14

nortal CHIEF’S new world order In his rise to becoming a world-leading administrative software developer, Priit Alamäe prides himself in never having to address anyone as boss: “Apart from my wife of course”.

Few business leaders can boast of never having taken paid employment, even briefly, at the start their careers. The Nortal chairman’s entrepreneurial essence runs pure as the priciest vodka.

This spirit has been rampant over a decade in which the Estonian’s a43m-turnover software development company Webmedia, specialist in customised systems for government and healthcare providers, has become one of Europe’s fastest growing IT businesses. In October the firm announced a major contract with one of a string of big international wins, most significantly the a7.3m acquisition in May 2011 of Finland’s CCC Corporation, which led to the rebranding as Nortal. Barring global economic turbulence, the firm expects to grow by 50% over the next two years.

BQ invited the 35-year-old founder and chairman to lunch, to discover Nortal’s “secret sauce”, and how he intends to build on Nortal’s stellar success in Europe, the Middle East and Africa.

BUSINESS LUNCH

Self-made Estonian entrepreneur Priit Alamäe - creator of one of the Baltic’s biggest software empires - takes time out from the perennial push for global growth to enjoy lunch with BQ’s Colin Donald

This is a story that deserves to be told over a sumptuous meal. Estonia is recognised as a pioneer of e-government systems, and Nortal has built between a third and a half of Estonia’s software infrastructure. “If you follow the deductive method of our friends Mr Holmes and Dr Watson, that makes us world leaders”.

But the Nortal story turned out to be just the hors d’oeuvres. The main course was its founder’s impassioned advocacy of a lean and globally-ambitious Estonian IT sector, one that thinks in terms of “consolidating the balance sheets of others, not being consolidated ourselves”.

The venue for lunch was the Tchaikovsky, a Russian restaurant, in the Telegraaf Hotel, on a cobbled street at the heart of Tallinn’s UNESCO-protected old town. The dining room is a stagey evocation of imperial Russia, dominated by a brooding portrait of the Swan Lake composer.

The Tchaikovsky has long reigned as one of Tallinn’s finest dining spots, the head chef Vladislav Djatsuk offering up variations on old-time Russian staples - pelmeni [dumplings], trout with yogurt, roe and bisque, beef tartare, borscht with pirozhiki. These dishes

37

are sprinkled artfully over a menu that contains a larger number of more familiar, Frenchified dishes, posing less of a challenge to unadventurous western business visitors.

Humorous and open but brisk, Alamäe is no smalltalker. I start by asking him about the milestone Finnish acquisition, made all the sweeter after Webmedia’s failed foray into that country a few years previously. He describes as a psychological breakthrough for an Estonian - “a bit like challenging your big brother”- in that it reversed the time-honoured flow of capital from the Nordics to the Baltics.

The merger has gone “surprisingly smoothly” he says. “One of my friends said very nicely that business is all about being in the right place at the right time, but you have to put in s***loads of work to get to the right place at the right time.”

A stronghold in Scandinavia has put Nortal, which employs 600 people worldwide, on a solid platform from which to leverage internationally its know-how in public systems software. Much of which is oriented at healthcare, both in hospital-level administration and in highly sensitive health records and patient administration procedures.

“A lot will depend on what the world >>

BUSINESS QUARTER | WINTER 14

BUSINESS LUNCH

WINTER 14

We are expecting within the next two to three years, at least 50% total growth.

Let’s see if we can do it. We have lots of strategies we can put on paper economy is going to do but provided the global outlook remains the same or more positive, we are expecting within the next two to three years, at least 50% total growth.”

“Let’s see if we can do it. We have lots of

BUSINESS QUARTER | WINTER 14

strategies we can put on paper, but let’s see if they work out.”

The company’s strategies have progressed fairly steadily since its first big contract wins in 2001. Since then they have been “trying

38

to be present in the areas which are critical for the functioning of government such as taxation, public finances, back-end systems.

We have been working on public financial management, budget automation, revenue collection, things like that.”

As we dip fancy bread sticks in an exceptionally tasty savoury tomato paste, Alamäe surveys the Tchaikovsky’s dining room and reflects on its role in Estonia’s three-act economic drama. Although only a third full on a Monday lunchtime, he remembers the heady pre-crash days when you had to fight to get a table. And it’s not because the food has gone downhill.

“Before 2008, the whole of our society went mad. This restaurant is not the cheapest in town, but it was always full. A lot of the patrons were construction workers, who were making so much money, as people were throwing up buildings everywhere.

“What happened here in Estonia was the same as what happened in Spain and in Ireland, if you take any economy that is too much focused on capital investment, it’s just not sustainable. Look at China. The capital investment ratio to the whole economy is far too high.”

Alamäe is proud of the speed at which the Baltic States recovered from the crash of 20089, although he is only half-joking when he says he wishes that the recession in Estonia had continued longer, forcing more “complacent” companies to do as Nortal did and retool for international competition.

He takes a grim satisfaction in his country’s status as “world champions of budget cutting”, both in the public and private sectors, contrasting it to southern European crash victims like Greece and Spain: “What part of ‘there’s no more money’ do they not understand?” he snorts.

“Imagine 25% budget cuts in Britain. It would be like ‘Oh my God, they’re taking away our welfare!’

“I think Estonia is the only country in the world where, if you ask people on the street what the national priorities are, they will say that the budget has to be balanced! We have a saying here that debt is someone else’s money.”

Priit Alamäe’s career started while an 18

WINTER 14

year-old student at the University of Tartu, when he launched a political and social research company.

Entrepreneurialism was ingrained - his father, an engineer, was one of the first Estonians to register a business (electrical repair and parts) after the Soviet-era restrictions were relaxed in 1991.

Nortal’s predecessor Webmedia was his second business started “just as the dot com boom was crashing in 2000”. The difficult birth, he now believes, was an advantage, though it didn’t seem like that at the time.

“If you start a business at the height of the boom, you get to take things very much for granted, and usually it will not pan out once the boom comes to an end.”

In Webmedia’s case, not only were the economic circumstances hostile to growth, so was the infant company’s product.

“We started out as e-commerce and e-marketing killer website engineers, but the market realised that that was not where the money was, at least in the short term. So in the modern parlance we had to instantly “pivot” into classical software engineering, going from the fancy webshop portals, to the down-and-dirty back end systems that actually drive our economy”.

“One thing we realised is that people don’t actually care what is behind the facade. If you have a smartphone you don’t really care how the processor is working, and how the memory and the OS work, you don’t care. You care about the usability experience.

“Most software engineers were run by people from a hard Soviet-era computer science background, you know the kind who tend to avoid eye-contact?

“We had to differentiate ourselves.

Although we’re not so audacious as to compare ourselves with Apple, in our small scale, we were doing the same kind of thing: putting designers and business people at the forefront of decision-making and working out ways to tell customers about things they didn’t previously know they wanted”.

The arrival of the starters gives Alamäe the chance to draw breath. They include the trademark red Russian soup and Priit knows a good borscht when he tastes one. “We grew up with this soup” he jokes, avoiding

BUSINESS LUNCH

further comment on Estonia’s grim decades under Russian rule. “The secret is to fry the vegetables before you boil them so that they don’t get too soft, and use beef stock rather than lamb stock.” This leads him to muse on other “legendary” Russian dishes on the Tchaikovsky’s menu, including steak tartare.

“The Cossacks used to tenderise the meat before slicing by riding with it under their saddles. Must have tasted great.”

Russia’s chief interest to him nowadays is not its cuisine but its potential as a market for Nortal’s Moscow-based subsidiary. Given the heightened political tension of the Putin era, how sanguine is he about growth prospects in that country?

“If anyone could predict what was going to happen in Russia in the next five years, that person would be very, very rich. But ultimately Russia needs the rest of the world, as much as the rest of the world needs Russia.

“We have also been working in the development sector in Russia and as in any country you have the good and the bad and ugly, same would go for Estonia, Russia, Nigeria, and the UK. I don’t think there is any country in the world that is corruption-free,

39

it just comes in different sizes. In the UK and the US its legalised and called lobbying.”

In fact Nortal’s software systems are attractive to governments in developing economies, including Oman, Qatar, and Botswana, precisely because of what they can do to prevent corruption. In Nigeria for example, the company has been working on a US$30m World Bank-financed pilot to build a core financial management system for the world’s seventh most populous nation. Nigeria’s entire federal budget preparation and treasury management, are now managed through Nortal software. Recent reports claim the project has already saved the Nigerian government US$160 million by centralising payments and eliminating fraud.

Students of Estonia’s success often point out how its tiny domestic market forces its well-networked ‘mafia’ of entrepreneurs to think and act globally from the outset. As the main course arrives – roasted Estonian beef fillet with asparagus, potatoes and juniper sauce for him, roasted duck with citrus, alpha [homemade Russian noodles] and malt sauce for me – Alamäe warms to the theme that Estonia needs to think more ambitiously. >>

BUSINESS QUARTER | WINTER 14

BUSINESS LUNCH

WINTER 14

Eat like a oligarch On Vene Street, a short walk from City Square In the heart of Tallinn’s 13th Century Old Town, the Tchaikovsky is part of the 86-room Hotel Telegraaf, an impressive classical block, built in 1878 to house an HQ and exchange station for Estonia’s first telegraph company. As well as the restaurant, and lobby cocktail bar, the hotel’s summer terrace is a well-known oasis and business rendez-vous.

Voted the third-best fine dining venue in recent survey, the Tchaikovsky presents high quality and good value. With starters costing around a9, main courses averaging a18, coffee at a2.90, mineral water at a hefty a4.50 for 33l bottle, our lunch bill came to a respectable a78.20, including VAT, but not including service. Although we steered clear of the Tchaikovsky’s wine list, it is recognised as one of the best in Tallinn, for “old world” wines at least (Australia, NZ, Chile and the US have only a token presence). Prices for the extensive French, Italian and Spanish selection ranging from the a30-50 mark, to eye-popping amounts for the finest vintages, for example a 1996 Château Latour, Premier Grand Cru, Pauillac at a1450 a bottle.

Vene 9, 10123 Tallinn, Estonia +372 6000 600 info@telegraaf.com www.telegraafhotel.com

“Whatever we do as a tiny country – and the same goes for the other Baltic States – we need to ensure that we have headquarters.

“What we have been trying to preach is we don’t have to produce everything, but we do need to make sure we are leveraging the full potential of our work forces.”

“Our traditional idea of exports is making things here and sending them out by plane and train. But you need to have companies that are consolidating the balance sheet of others, and not being consolidated ourselves.

That is where the wealth and the growth

BUSINESS QUARTER | WINTER 14

are coming from, the leverage of capital.

“It’s not happening fast enough, definitely not.”

As we savour the Tchaikovsky chef’s handiwork, Alamäe, who speaks Russian and Swedish as well as elegant English (“we don’t delude ourselves that anyone else is going to learn Estonian”) ranges compellingly over a global conversational landscape. Topics include the importance of “playing in your own league” and avoiding giant Asian markets, admiration for Oman and the potential of the Gulf states, the impact of US shale gas, the

40

excessive complexities of East Asian timezones, Latvia’s accession to the Eurozone, how the Baltics disproved the Keynesian theories of US economist Prof Paul Krugman (he’s not a fan). He also quotes approvingly Mrs Thatcher’s view of socialism “pretty soon you run out of other peoples’ money.”

Like the late British prime minister, his attitude to business and politics might be described as ‘robust’. He expands on an arresting theory that the Estonian recovery from the 2008 crash happened too quickly, and that a longer period of austerity would have enabled more reform.

“When you have a disease, you can delay the medication to bring rejuvenation, but our government administered shock therapy for the whole country. It really forced companies to change their modus operandi. A lot of the country turned to exports, while local consumption died down. People who had had a nice cosy life living off local markets had to look for alternatives, but the recovery was too quick, a bit more pain would have brought about more thorough reform as when we recovered, the reform stopped.

“What I am worried about in Estonia is that we get too comfortable and think that we have already done it. Complacency is the death of any successful system.”

Does he think the explosion of Estonian IT is becoming a bubble? “Of course it’s a bubble, and it has been inflating for some time.

Why do I think it will not burst? Because the sector is highly diversified. It’s a collection of globally oriented start-ups, which have a totally different cycle than companies which are working for the Estonian market, and even here there is strong diversification between public and private sector.”

I want to press him more on this, and much else besides, but lunch is abruptly over as Priit has another meeting.

He sweeps out of the restaurant leaving BQ to drink a restorative coffee, settle the bill, and digest this privileged close-quarters display of energy and intuitive, keep-it-simple, commercial sense.

Estonia has only a 1.3 million population, but can a country that contains a network of entrepreneurs with ambition of this kind be meaningfully described as small? n

WINTER 14

41

BUSINESS LUNCH

BUSINESS QUARTER | WINTER 14

RESTAURANT REVIEWS

WINTER 14

Business leaders and entrepreneurs are spoilt for choice in the Baltic when it comes to stylish, vibrant food and drink hotspots in which to spend their down time, secure deals and win contracts

>> Pizza Jazz >> Restaurant NERO Tallink Spa & Conference Hotel, Sadama 11a, Tallinn, Estonia The menu of Restaurant Nero can be described in one word - innovative.

Chef de Cuisine Andrus Laaniste loves to experiment, and his creations harmonise superbly with the restaurant’s futuristic decor. Dishes that feel their way around the borders of flavours offer the delight of discovery to everyone who finds that conventional assortments are no longer sufficient. Have you ever tried amedei milk chocolate sphere with liquid hazelnut and textures, plus cold mango foam for dessert? All this makes Restaurant Nero a place where true food-lovers can expand their comprehension of global food culture.

The plates display creations made mostly of locally-sourced ingredients, but is excitingly exotic at the same time. On preparing the menu, the chef has seen that everything useful in the raw ingredients has been retained. This restaurant asks patrons to expand their taste comprehension and find new favourites. Restaurant Nero has been included in the TOP 50 best Estonian restaurants since it opened.

Contact T: +372 630 1018 E: spahotel@tallink.ee

BUSINESS QUARTER | WINTER 14

>> Skyline Bar

Elizabetes 55, Riga, Latvia

Pizza Jazz Vilnius: Savanoriu pr. 16; Jasinskio. 16; Ozo g. 25; Vokieciu g. 24 Pizza Jazz Kaunas: Laisves al. 68; Savanoriu pr. 349; Griciupio g. 9; Taikos g. 141; Vilniaus g. 26 Pizza Jazz Marijampole: J.Basanaviciaus a. 8

Urban and stylish, Skyline bar on the 26th floor of Radisson Blu Hotel Latvia is the best place in Riga to enjoy cocktails in the sunset, all year round. Here patrons can experience the fizzing atmosphere of a Friday evening party night, a wide choice of cocktails, mouthwatering appetisers and main dishes, good music and the most beautiful view in the entire capital city. Skyline bar offers more than 100 various cocktails and other drinks for all tastes including classics like Mojito, Margaritas and Daiquiri, as well as local specialties like ‘26th Floor’, ‘Riga’s Spritz’ and many more. In the bar menu visitors will find a wide choice of snacks, salads and sandwiches. Skyline bar has established itself as the favourite meeting place for both locals and Riga visitors. On the weekend the most popular DJs of the city play the latest dance music. No-one coming to Riga should miss Skyline Bar – the city’s one and only cocktail lounge in the sky!

Pizza Jazz and Pjazz restaurants group has ten restaurants in Vilnius, Kaunas and Marijampole. They have been providing quality food, hospitable service and a stylish atmosphere for more than 20 years.

Its confidence comes from its long experience. It pursues the best results and does it with passion. Its highly professional team is naturally hospitable, and seeks not just to satisfy its customers‘ needs but also to surpass their expectations.

Its unique atmosphere is created by stylish decor, but since the start, it‘s always been about the quality of food. In most of the restaurants customers are able to watch staff at work preparing it in its open kitchens. It is famous for quality food based on healthy eating principles and, of course, freshness.

It represents the best of European cuisine, with menus containing great snacks, salads, pizzas, main dishes and fantastic desserts.

Contact T: +371 6777 2282 Follow us on Facebook: facebook.com/SkylineBar

Contact www.pj.lt

42

WINTER 14

RESTAURANT REVIEWS

>> Fazenda Bazars

Baznicas st 14 / Nometnu st 7, Riga, Latvia

>> Kuninga

Kuninga 3, Tallinn, Estonia Kuninga fish restaurant, on the street of the same name in Old Tallinn, close to the Town Hall Square, invites its guests to enjoy delicious meals cooked from local and exotic fish and seafood by chef Rustam Chikalovets (the winner of The International Kremlin Culinary Cup 2013). Kuninga translates as ‘royal’, and patrons can expect to receive truly regal treatment.

Kuninga Restaurant is a paradise for seafood lovers and those who appreciate delicious meals in an exquisite atmosphere...

Its restaurant’s cooks are among the finest in Estonia – their culinary masterpieces will impress even the most demanding gastronome. It has a huge selection of wines (with over 300 bottles to choose from), and waiters will be happy to advise which of them complements a meal best.

The interior’s sophistication and luxury will make patrons feel like a king or queen surrounded by elegant and amiable staff.

Contact T: + 372 64 66 008 E: kuninga@kuninga.ee

Whether you want a meal, a relaxed drink or just to grab a coffee, the cosy village inn-style venue, Fazenda Bazars, is the place: a cafe, bar and a restaurant in one pack.

Located in two sites in Riga – centrally at Baznicas Street 14 and on the other side of Daugava river on Nometnu Street 7 these places are hidden gems, with entrances bedecked by flower pots, making it feel just like you’re in the real countryside.

The central Fazenda is like finding grandmother’s country cottage in the middle of the city centre, with a small market selling local hand-picked berries, fruits, and vegetables at the entrance. The cafe offers a simple, everyday selection of meals cooked from Latvian-grown products. The creative seasonal menu is light and tasty – try the selection of local cheeses or the spinach and pear salad with monterigo cheese under coriander sauce.

More substantial meals are also served, like soups or slow roasts. Fazenda has very good wine selection too. A summer terrace is available during warm seasons, as well as a free WiFi connection inside for guests.

Contact T: +371 67240809 / +371 67616196 E: info@fazenda.lv

43

>> Verres en Vers

Didzioji 35/2 Vilnius, Lithuania Et voila! Bienvenue Verres en Vers at the Radission Blue Astorija. It’s in the software, the hardware, the belief, the passion, the personality, the understanding, the commitment, the ambition, the legacy, the authenticity, the respect; it’s in its very DNA, down to every little detail.

Not big concepts per se, but a real French brasserie, well-suited to the modern world, that can boldly and consistently go wherever its passions take it.

A true and honest representation of a modern brasserie where all the old values and principles of French cooking remain, yet it’s delivered in a way which is relevant to the contemporary world.

A consistent quality of service, quality of produce and quality of design, all mixed together with a liberal dash of skill and a large helping of bonhomie.

Welcome to Verres en Vers, our very respectful, very thoughtful, very exciting, modern interpretation of a traditional French Brasserie.

Contact T: + 370 5 236 0840 E: reservation.vev@radissonblu.com

BUSINESS QUARTER | WINTER 14

TRAVEL

WINTER 14

Switch off your smartphone, put the ‘to do’ list on hold and pack your bags for a land of luxury – for Didzis Melkis may have just the place for your next relaxing retreat

Eco Luxury In Lithuania BUSINESS QUARTER | WINTER 14

44

WINTER 14

TRAVEL

Land of luxury: Lithuanian luxury spa resort IDW Esperanza near the country’s capital Vilnius is set in beautiful surroundings For small nations, culture is as much about reordering and re-presenting what is borrowed from others as it is about projecting a unique identity. Being cosmopolitan and open to global influence doesn’t make a place less authentic. When it comes to luxury hotels, there is a good chance that stuff that is flagged up as culturally unique will anyway be made made for tourists and ‘not the real thing’. The big test is how well the place absorbs and adapts to global hospitality standards.

When you take the best available attitude to guests, put it in the nicest place and in the most considered way, you get a real jewel.

This recipe has obviously worked in the case of the Lithuanian luxury spa IDW Esperanza resort near the country’s capital Vilnius.

The lovely Trakai region has a unique lakeland landscape, which is quite distinct from beauty spots elsewhere in Lithuania. That’s

the truly local element of Esperanza’s magic.

Then there are the Canadian cedar logs that the resort’s buildings are made of – the best available according to the owner, himself a Canadian citizen of Lithuanian extraction.

>> Getting There A few miles out of Kozelkiskiu village, GPS co-ordinates 54.605383; 24.746161.

About 40 minutes drive from Vilnius Airport.

Add the best hospitality standards, an international service crew, the finest products both from around the world and from the kitchen garden on the lakeshore and a Spanish chef and you get a unique and irresistible luxury experience.

45

As recently as a year ago this article could have been entitled ‘a peep into a private world’, as from its foundation in 2009 until 2012 Esperanza was a VIP members’ club – a trophy resort for its well-heeled owners.

I was wrong to assume that it was economic hard times that had forced it to open to the general public. On the contrary, parent company IDW (International Display Works) has thrived in the high fashion-end of the garment industry, where it is known as one of the top shopfitters and makers of mannequins. As the big brands have boomed, so have they.

I get the impression that the resort’s new opendoors strategy was designed to answer the owners’ questions, namely: How good are we? What do others say? Could we qualify for this or that luxury association membership?

As it turns out, they can. During its brief period of wider availability, Esperanza has already >>

BUSINESS QUARTER | WINTER 14

TRAVEL

WINTER 14

Good catch: The kitchen at the Esperanza is run by Javier Lopez-Ruiz (above), a Spanish chef who’s worked at a number of Michelin-starred venues gained eco resort status, and is working to upgrade that. It has also joined the exclusive Small Luxury Hotels of the World chain.

Let’s start with food, perhaps the most exacting test for those focused on a luxury offer. The kitchen is run by Javier Lopez-Ruiz, a renowned Spanish chef who has worked at Michelin-starred restaurants like Sea Grill in Brussels, Gaig Restaurant in Barcelona and Au Crocodile in Strasbourg. And, whisper it, the Esperanza has aspirations to join that constellation.

Then there’s the service. Esperanza staff exude a sense of genuine curiosity, which derives from the owners. When they talked to us, it wasn’t the usual how-do-you-like-it-here? routine but a sincere interest. The service in general was not simply five stars but the best,

BUSINESS QUARTER | WINTER 14

the kind where the most routine tasks are carried out with sensitivity and respect for the guest’s quirks. I have a few myself, like a hatred of over-fussy room service that pedantically rearranges my stuff for the sake of it. Here they judged it just right.

Looking particularly glorious against a stupendous palate of autumn colours, the Esperanza is on the shore of Lake Ungurys in Aukštadvaris Regional Park very close to the red brick, round-towered medieval fortress of Trakai, which dates from around 1400 and has been expertly restored. The cosy little town of the same name is a gem. This region is a must-see for any visitor to Lithuania.

Boating and yachting is available there – a good chance to enjoy the beautiful landscape from another perspective. It’s also easy

46

>> Rates 34 tastefully designed and fully equipped non-smoking rooms ranging from €179 for a single room to €395 for Super Lux tworoom suite with lake views. Disabled access rooms available.

Esperanza Club members can take advantage of a 20% discount.

Room rates include the following: Transfer from (to) Vilnius Airport to (from) IDW Esperanza Resort; Early check in/ late check-out upon availability; Wi-Fi access in all resort area; gym, sauna and swimming pool access.

The business centre is equipped with tele-conferencing facilities.

WINTER 14

travelling distance away from the Vilnius, the modern capital and ancient seat of the medieval Lithuanian-Polish kingdom.

For lovers of the antique, delving down through the layers of Vilnius’s baroque-rocococlassical old town is an engaging exercise in

>> Additional services SPA beauty treatments and massages performed by internationally trained therapists; Russian bathhouse; Fishing in Lake Ungurys, all seasons; Sightseeing tours in a four-seater airplane, flying over Trakai and circling the spectacular Trakai castle; Golf course reservations and transfers; Skiing and snowboarding course; reservation and transfers; Ticket booking service.

time travel, but just to stroll through these streets is a carefree pleasure.

After sampling a gorgeous breakfast we had a restful boat trip on the lake, leaving behind our youngest child, who opted instead to ride one of the resort’s complimentary bikes along lengthy paths in the pinewood with a new friend. He could also practice his bowling in the bowling alley and immerse himself in the playroom.

It’s a sign of how well Esperanza caters for young families, as well as more mature and

business guests, that we had no reservations about leaving him behind. Not only is there a kids’ club, but the surroundings must be among the most secure and well-chaperoned places in Europe.

After a day of energetic sight-seeing there were those long and relaxing evenings in the Russian bath house and swimming pool.

There are also two Thai ladies standing by to massage your troubles away. This is what I call cosmopolitan!

That kind of tender loving care – not to mention a stress-busting gym – could come in useful after a hard brainstorming session with colleagues and partners in one or the resort’s conference rooms.

The Esperanza is a perfect place for a business decision-making awayday. If the meeting has been a success but, in the hectic rush, you have forgotten a business-trip present, the richly-endowed wine and cognac

TRAVEL

cellar is at your service.

One last thing: Not only is autumn spectacular, but the long winter months offer plenty of opportunities for snow-bound activities like ice-fishing, snow-mobiling, cross-country skiing and skating.

They even have a stable of horses, and what could be more romantic than a horseback tour of the woods and the lake in the snow?

There is no ‘out of season’ at Esperanza.

It’s not a term that Mother Nature would recognise, and neither do the staff here. n IDW Esperanza Resort, Kozelkiskiu Village, Bijunu Post, Trakai District, Lithuania Tel.: +370 698 78378 Fax.: +370 5 2784163 www.idwesperanzaresort.com info@esperanzaresort.lt facebook.com/idwesperanza

After days of energetic sightseeing there were long and relaxing evenings in the Russian bath house and pool

47

BUSINESS QUARTER | WINTER 14

entrEpreneur

BUSINESS QUARTER | WINTER 14

WINTER 14

48

WINTER 14

entrEpreneur

out of the woods It took a reality check from Mother Nature to give Egons Mednis the clarity to ensure his IT business ELKO survived the financial crash.

And he and Latvia’s fifth largest company haven’t looked back since, as Colin Donald reports

49

When the Latvian economy suffered cardiac arrest in 2008, the president of ELKO, now the country’s fifth largest company, could have been forgiven for panicking.

The IT market ELKO operated in dropped by some 40-50% and over 18% was wiped off Latvian GDP, a slump that was echoed – though not quite matched - in some of the company's key export markets. As a wholesaler of hardware, Egons Mednis knew that the company he had founded in his student days was suddenly vulnerable, as customers rapidly shelved upgrade plans.

But Mednis did not panic. He did what he does most weekends and retreated to the peace and tranquillity of the Dikli Palace, a czarist-era mansion in the rural heart of Latvia’s northern Vidzeme province. Mednis had bought the property and its surrounding 20 hectares of countryside in 2000, and taken as much care in restoring it to its former glories as he took to build up his international business. It is now one of the finest country house hotels in the Baltic states.

“It was a disastrous time, unbelievable.

Everything was going down and nobody >>

BUSINESS QUARTER | WINTER 14

entrEpreneur knew when it would stop and how it would finish, or even if it would finish at all.

“Then when I entered the woodland and saw the animals, and heard the birds singing, and the mushrooms are growing, everything just happening exactly as normal, I got it all into perspective.

“Maybe some people don’t understand the value of this experience, but ever since I went hunting with my father and grandfather as a boy I have been a nature-lover. I have always enjoyed hunting or just sitting in a seat in the forest, and switching off. Nature helped me to manage internal company problems, and to organise my mind, and maybe allowed me to create some new ideas.”

Rural therapy obviously worked. ELKO has not only survived to celebrate its 20th anniversary this year, it has thrived. The crash forced the company to retrench, but as good leaders should, Mednis used the crisis to effect an overdue internal restructure, a rationalisation that he believes helped the company bounce back, in 2012 regaining the US$1bn turnover it had achieved in 2008, before the financial crisis devastated IT markets across ELKO’s operating territory.

“Yes we had to decrease our costs but what we decided to do was not to save on the development of infrastructure, even if turnover-wise business was not increasing.

We tried where possible to keep people, and keep them busy with overhauling our internal processes for two years. Up until then everything had been growing, growing growing, but the back office wasn’t keeping up. This was the time to focus much more on internal things. It has helped us become much more competitive as since about 2000 we felt we had been running behind the very fast train of economic growth.

“We did this homework and we went out of the crisis in much better shape than before.”

So it was a blessing in disguise? Mednis gives one of his frequent, modest smiles. “Almost.”

Last year the company, which has over 340 employees, achieved 20% growth, a feat that it expects to match in 2013-14.

Given that the IT product cycle is as fast as it is unpredictable, even without economic near-meltdown, ELKO’s ability to be both big and nimble is itself a tribute to the man who

BUSINESS QUARTER | WINTER 14

WINTER 14

founded the company with three fellow IT students from Riga Polytechnic in the early 1990s.

It was a heady time, just after the fall of the Soviet Union. The young entrepreneurs chose the IT sector because that was what they knew about, not because they foresaw the sector dominating all aspects of modern life.

“At that time we couldn’t plan even one year ahead, let alone longer into the future. It was a time of a lot of changes but we were young and motivated to reach out and do something.

We had nothing to lose, nobody in the whole country had any business experience. The old Soviet system was broken and we were seen in Western Europe as a kind of wild area.

“Yes we made compromises and made mistakes that wouldn’t be allowed today, but everyone was learning at that time, it was the right time to take chances, and we got burned a few times, for example when we received fake payment documents from some of our then business partners.”

is partly the nature of IT. When the business started, it was a supplier of components mainly (hard drives, processors and graphic cards) as well as some monitors and peripherals. By 2000 the market was different, and ELKO moved into notebook PCs as a key partner for Acer and Lenovo, and they have since transformed themselves again, with the shift away from PCs to smartphones and tablets. Along the way there have been economic disruptions to cope with, such as the 1995 Latvian bank crisis which caused ELKO’s German partner to withdraw from the partnership it saw as “a little bit too risky”. ELKO bought out its shares and as an independent moved into Russia in 1995, as well as into Ukraine in 1998, just as the latter country was entering its own major financial crisis.

More recent upheavals have been technological, and Mednis’ countryside contemplation is focused on managing and anticipating market trends. “Windows 8 was

It was a time of a lot of changes but we were young and motivated to reach out and do something

The firm had been born in 1993, wholesaling hardware first in Latvia, then in the other Baltic nations. Their big break came as a the result of programme agreed by Soviet leader Mikhail Gorbachev and German Chancellor Helmut Kohl, which gave Mednis the opportunity to study IT in Germany. The contacts made then were behind the company’s first joint venture with a supplier based in Regensburg allowing the budding firm to supply a large tender with a Latvian bank.

Now the company trades in nine eastern European countries, including Russia, its biggest market, and one relatively unscathed by the financial crisis that struck much of the western world.

Managing constant change, if not crisis, has been a hallmark of ELKO’s two decades. That

50

not successful” he says. “The new generation is moving more to these ultra-light devices which are used not primarily for content creation - the main purpose of a PC - but also for this consumption of information: watching films, exchanging information on social media, it’s not so much creating content, a lot of users are consuming this technology in ways that mean changes in the market generally. If you are only using this content through the internet and all these wifi access possibilities, you don’t need more screens, and smart phones are enough.

“We are now focusing on servers, solutions, networks, storage products, and cloudcomputing-related software. This segment is looking like replacing classical components.

Last year was the first year the amount of PCs

WINTER 14

and notebooks declined and this solutions segment has grown and it’s definitely one of our key focus areas, it’s an area where we are growing faster than other companies.”

As well being the strongest partner for such companies as Acer, AMD, Asus, HGST, Intel, Lenovo, Microsoft, Seagate, Sony, Western Digital and many others, Mednis believes that ELKO’s success stems from “A readiness and an ability to change, to adapt, to learn, to try new areas”.

“In terms of products this is very very important. Also, during the downturn we made a lot of improvements internally, and we have quite developed internal systems, that are closely linked to our partners and our vendors. All of our sales information goes directly to a database and is used for planning of production. These ecosystems are very well connected, and very well integrated.”

All businesses talk about being customerfocused, but ELKO prides itself on having a knack in this area. “It’s very important to keep a fair attitude to our partners and vendors and financial partners, and of course to our customers. So that even if you don’t have good news – you can’t make a delivery or whatever - it’s important to communicate that and to provide the proper information at the right time in order to find some solution.

“Of course our business is very price-sensitive and very competitive, but often the advantage is not about price, it comes down to the package of services and information flow, and finally private contacts and relationships which are very important in our territory.”

The firm’s focus is now on “deepening” its operations and product ranges in its established markets rather than seeking further geographic diversification, with the aim of always being the leading wholesalers and preferred partners in any relationship.

That said, ELKO’s pioneering tendencies are resurfacing. It is opening a subsidiary in, Almaty, Kazakhstan a country whose economic potential has been picked up by the firm’s antennae.

Mednis has no intention of going up against giant and well-established competitors in Western Europe and Scandinavia, especially as he sees the West’s economy going nowhere fast. “The European problems could be >>

51

entrEpreneur

Egons Mednis puts ELKO’s success down to its readiness to change, adapt, learn and try new areas

BUSINESS QUARTER | WINTER 14

entrEpreneur

WINTER 14

here for many years, five years [since the crash] is already a long time and we don’t see a clear end of this story, it could last for another two or three more years.” Even the Eastern European markets he says are “frankly stagnating” at present, but their growth potential excites him more.

ELKO will therefore concentrate on boosting profitability in its Baltic home, also in its biggest market Russia and Ukraine.

“CIS countries present the biggest portion of our business.

Russia is around 65% and the Ukraine 15%.

“Russia is a very different story to Eastern Europe. They had local credit, local banks who weren’t providing this crazy financing, like in Western Europe where the debt was so huge.

Russia was quite fast down, but it was a very fast recovery. Generally in the second half of 2009 it was already back on track.”

This year he concedes growth forecasts have been downgraded from 6% to about 2%, but ELKO’s share of the market has increased steadily.

“Eastern European countries are where we can use our knowledge, our potential. Maybe because these markets are not so established,

Five years is already a long time and we don’t see a clear end of this story

BUSINESS QUARTER | WINTER 14

52

WINTER 14

you have to be a little bit more flexible, infrastructure is not so developed, you have to be more proactive.

“For us the aim is to have an international structure backed by our good infrastructure and back office that makes us able to exploit international possibilities, and at the same time not being so big and too inflexibile that we can’t adapt to local specifics and local requirements. This is the key. Our strategy to use the advantage that comes from being present in many countries, but at the same time having this local face so we are not seen as foreigners but accepted as locals.”

The formula seems to be working exceptionally well, though Mednis admits that

entrEpreneur

ELKO will struggle to match last year’s 20% growth. “We are partly compensating for this decrease with new segments and we have added new products for smartphones and tablets. This is a nice business and still growing, but still when the overall market is slowing down, it is difficult to provide 20% growth on an annual basis.”

No doubt that Egons Mednis is a hard-driving businessman and a tough competitor, but his approach seems based on considering matters carefully and deeply. I expect him to say that he at least had an inkling, during the years of the Baltic bubble, that the good times were illusory.

“No, I wasn’t aware that the growth was

Palace passions and vintage tastes While Egons Mednis cares deeply about boosting his business, this passion is more than matched in his parallel career as a high-end hotel proprietor.

Mednis bought the then crumbling Dikli Palace in 2000, and the separate private company he started as Dikli Pils since spent US$2.5m on restoring it “from cellar to attic”, transforming the 1896 manor house and surrounding outbuildings into a 42-room, four-star hotel, spa and business conferencing destination.

For years he had been passing it by and regretting its advancing state of disrepair, but it was not until he was invited to attend a business meeting at a small luxury country house hotel near London that he was inspired to take the major step of acquiring the former czarist-era hunting mansion.

“It was at an old castle in the English countryside, in a very nice area with a golf course and old parkland and trees. I got it into my brain that you can build whatever you want, in whatever style you like, but all that history, all those old trees, and the atmosphere you just can’t create this for any money.”

“I was inspired to buy the Dikli Palace because I love to be at one with nature. Like my father and grandfather I am a hunter and a fisherman, and loved to come to this place during the hunting season, and I thought why should only foreigners like the Swedes and the Germans restore old properties? I bought it as a business project, although we didn’t have any experience in the hotel business. I wanted to try something different, something new and interesting.

There was also a patriotic reason: if we Latvians didn’t take care of our heritage, who would?

“Maybe it’s not perfectly tidy and regular as it might be in Germany or somewhere where every field is neatly drained, but I think it is a great asset to this country, and being here amongst the wonderful flora and fauna, I can come here and just switch off, and I like all of our guests to have that experience.”

Buying the hotel has increased Mednis’s passion for the antique in all areas, but especially vintage cars. He has a “small collection” of Jaguars (“a brand that intrigues me”) and a 1952 Rolls Royce. For the last eight years the resort has hosted the Dikli Retro Rally, a summer event that attracts vintage car racing teams from across the Baltic states and neighbouring countries.

53

unsustainable.” He admits. “I couldn’t believe that three or four years after joining the European Community something like this could happen in a stable society. Of course we knew about the real estate bubble it was something far far away.

“A lot of the signs we can see today were showing it, but we saw prices in Europe and nobody was really very worried. It was worldwide sentiment, the problem wasn’t created here.

“I can’t blame people. You have to imagine the mentality of people here who came from being in the Soviet Union where the better lifestyle of Western Europe was always something forbidden. Then after 10-15 years since we were able to move across the border, we felt we had learned to manage things and were accepted as partners or members of the European club.

“Those economies were booming and everything was growing so of course people in the Baltic states thought ‘this is paradise’, everything works, everyone can afford a car, an apartment, to travel for vactions. Banks were happy to provide the finance.

We felt ‘we have arrived’, and everything will go well for many many years and all loans will be paid back and we can take new ones. I can’t blame people for not having the experience and the practice of recognising this for what it was. For this to happen in a system like the European community was definitely a big shock.”

Aversion to the possibility of further shocks has made Mednis a strong supporter of Euro entry, which he sees as desirable for a small, open country that has difficulty managing its internal monetary policy.

Characteristically however he also sees the issue from the point of view of less welltravelled Latvians, whose fears about slight decreases in small incomes he empathises with.

Dealing with sudden adverstity and communing with nature have helped to make him philosophical as well as businesslike.

He regrets the mass illusion that caused the Baltic bubble. More to the point, he learned from it.

Because the region’s troubles didn’t kill the business, they ended up making it stronger. n

BUSINESS QUARTER | WINTER 14

OVERVIEW

WINTER 14

in association with

what will latvia do next?

Liene Dambe investigates how Latvia’s rapid growth can be built upon The growth is back - what’s next for Latvia?

That was the theme of a major business forum held at the European headquarters of Bloomberg in the heart of the City of London in October, in which VIPs and business leaders from Latvia and the UK gathered to assess the new possibilities offered by the country’s imminent Eurozone membership.

Hosted by the Latvian Embassy, the Latvian Development Agency (LIAA) and the leading Latvian private bank Baltic International Bank, the morning session was an efficientlyconducted and fast-paced tour on the ‘roller coaster’ of the modern Latvian experience, focusing on the extraordinary post-financial crisis achievements of the middle Baltic state, as well as - more importantly - a practical guide to potential investors on how best to obtain a stake in the contemporary Latvian success story.

The tone was set in introductory remarks

by H.E. Andris Teikmanis, Latvia’s recentlyappointed new ambassador to the UK, who raised the ‘crisis’ issue only to consign it to history. He noted that the country has been the EU’s strongest economic performer for the past three years. A track record like this, he said, should encourage outsiders to look closely at the ingredients of the country’s success and ask where there business fits in.

“Maybe it’s our ability to adapt quickly to the dynamic changes of the global economy?” he suggested. “Maybe it’s the ability of our business people to adapt to market trends.”

BUSINESS QUARTER | WINTER 14

In any case, he suggested, Latvia’s skills at effecting dramatic transformations have much to offer the wider EU and Eurozone as it struggles to implement reforms.

For the first session, Bloomberg managing editor John Fraher teased out some of the questions on the minds of investors about the sustainability of Latvia’s journey from the postcrash casualty ward to positive and confident aspirant for Eurozone membership.

His distinguished panel included Ilmars Rimsevics, governor of the Bank of Latvia, Ilona Gulchak, chairperson of the board and compliance director of Baltic International Bank, and Dr Dagmar Linder, Deutsche Bank’s managing director for Central and Eastern Europe.

Asked to explain Latvia’s extraordinarily rapid recovery from an 18% fiscal consolidation, and for the lessons learned, Rimsevics was

54

Maybe it’s our ability to adapt quickly to the dynamic changes of the global economy

WINTER 14

OVERVIEW in association with

admirably blunt. The lesson? “Don’t get carried away with growth and don’t overheat your economy as we did in 2004, when many people didn’t realise that a growth rate of 6-7% was not sustainable,” He said.

Latvia, he conceded had “paid a big price” for the mistakes leading up to the bursting of the bubble in 2008-9, but “the most important thing is to correct imbalances as soon as you can.”

“The Latvian lessons are speed, ownership, commitment and solidarity – especially speed.

If you can apply these things, especially speed, you can take a very strong stance and a very strong grip on the actions you are taking.”

Appearing somewhat impatient with the persistent themes of the Western media coverage of Latvia’s journey, and the effects of Latvian popular morale of what he portrayed as excessively negative anticipation of Euro entry (only 42% of the population actively support the move he conceded), Mr Rimsevics also had no time for half-baked newspaper theories about the Latvian cultural tolerance of pain and the legacy of Soviet rule. “Cut it out!” he said at one point, perhaps having heard one journalistic cliché too many, “I repeat, it’s speed, ownership, commitment and solidarity”.

Although Rimsevics noted that “Estonia did it even faster”, there were strong hints that other countries that are effecting slow-motion corrections of gross fiscal imbalances – the UK springs to mind – might watch and learn from the Baltic example.

It was the task of Ilona Gulchak to show how Latvia’s banking system was geared to aid investors, and also to attempt to correct what the panel clearly believed was undue emphasis on the country’s relationship with non-native deposits, another staple of recent coverage of the country, particularly since the Cyprus crisis. She pointed out these comprised only 49.4% of the LVL12.93bn (a18.2bn) of total deposits. This figure, less than previous totals, should be compared to Luxembourg (263%).

Malta (121.3%), Cyprus (116%), and the UK (67%).

Baltic International Bank (BIB), which manages funds of around a500m, is unusual in the region dominated by Scandinavian and other

foreign players, being a local, family-owned concern. Celebrating its 20th anniversary this year, BIB has ridden out more than one Latvian crisis to provide a bespoke and steady niche service as personal and business bankers, and expert guide to businesses wishing to take advantage of the country’s myriad opportunities. Ms Gulchak outlined Latvia’s uniquely strong strategic position at the ‘crossroads’ between east and west, its recognised ease of doing business, its strengthening credit rating and its exportoriented, pro-enterprise environment, which includes enticing tax relief mechanisms and other incentive programmes, also a corporate tax rate of 15%, one of the lowest in Europe.

Latvia’s well-capitalised (capital adequacy rates of 18.6%) banking sector, she said was back in profits, benefiting from increased commissions and a “comparatively high interest rate spread on loans and deposits

55

as well as the stabilization of the amount and quality of the loan portfolio.”

She also outlined recent beneficial changes to corporate tax law, including multiple tax treaties, and exemptions from tax dividends, which make Latvia ideal jurisdiction for holding companies. “Latvia has it all” she said “the location, the historical ties, the knowledge, the infrastructure, and most all the people who are willing to grow and develop and [provide] opportunities for the whole of Europe.”

Speaking from a transnational banking perspective rather than that of a local lender, Deutsche Bank’s Dagmar endorsed the picture of a healthy and enterprising financial climate in Latvia, and gave a glowing picture of its ability to cope with the imminent accession to the Euro – which she was happy to admit would lose her bank some of its transactional currency businesses – and also illustrated with some examples of Deutsche Bank operations in Latvia: >>

BUSINESS QUARTER | WINTER 14

OVERVIEW

WINTER 14

in association with

“We issued a bond for the Republic of Latvia, twice in 2012. The second bond which was issued in December 2012 actually achieved the lowest coupon, the lowest interest rate that Latvia ever achieved, 2.7% for a seven-year bond issue is incredibly low and shows how the capital markets judged the success of Latvia.”

“This year we actually issued a high-yield bond for a telecoms company that’s active in two Baltic countries. That really speaks to the possibilities an investment bank has in the Baltic region, and it speaks to how the companies have recovered, how positively it has recovered, and how positively the capital markets have responded.”

Deutsche Bank is not an “on-the-ground” lender, she admitted, “but from the interaction we have with banks and companies in the region, we do hear that the big companies in the Baltic countries have no problems accessing timely finance, all the banks want to offer their funds to the best and biggest clients.”

For the second session of the day, introduced by the Economist foreign editor and distinguished Baltic-watcher Ed Lucas, the focus turned to Latvia as an inward investment proposition. The session began with a star turn of a “sales pitch” by Latvia’s Harvard-educated economics minister Daniels Pavluts. To begin with, he urged the audience not to think of coming to Latvia – Riga in particular – to access the local market, any more than you

BUSINESS QUARTER | WINTER 14

This is an exciting new economic model that is far more sustainable than any we have had in the past

would open operations in Singapore or Hong Kong with no wider horizons than those two micro-markets.

Latvia, Pavluts argued persuasively, is a place where all the heavy lifting of structural reform has been done, indeed he suggested it has been done more thoroughly than almost anywhere else. The picture he painted was that of a place of strong regulation, a highly educated and hard-working workforce, good services, and a can-do officialdom who have managed to create a place where business can be established in a day. The great linguistic facility (which the quadri-lingual not quadriclingual Pavluts exemplifies) makes it ideal for doing business with east and west, and particularly with Russia (“we can really speak that language!”).

In the context of emphasising the country’s excellent communications links stretching far into Eurasia. Pavluts made much of Riga – the second biggest city in northern Europe after Stockholm – as a mighty engine of global trade, its ice-free port shipping out six million tonnes of cargo a year. “It’s always

56

been a strategic gateway.”

He even had time to squeeze in praise for the Latvian lifestyle offering, the quality of life offer emphasised by a recent survey that ranked the country the second greenest country in the world.

“We are the fastest growing economy in the EU, and what we are happy about is that there is no external account imbalance to speak of, there is no credit bubble, or any bubbles to speak of. This is an exciting new economic model that is far more sustainable than any we have had in the past.

“As minister of economics let me tell you this.

We are really tired of boom and bust cycles, and we will do everything we can to prevent them from happening again. Sustainable growth is something we mean rather than just say.”

Away from the theory - what about practice? The conference heard from a pair of businessmen who could attest first hand to Latvia’s advantages as a base for manufacturing and exports. Ugis Grinbergs, export director of UPB Holding, a firm with

WINTER 14

OVERVIEW in association with

over 20 years of experience in the construction industry, spoke about the qualities of Latvia as a base for managing a full portofolio of services, including engineering, production, delivery and assembly. Also bringing an international perspective was Dutchman Egbert Boerrigter, commercial director of US multinational materials and chemicals giant Cytec Industrial Materials, who has led the group’s business services operation in Riga since 2010, and was well-placed to endorse and exemplify the practical and attitudinal advantages of a Baltic base.

As Pavluts admitted, Latvia’s international reputation and profile has yet to catch up with the reality of its offer, and Riga, with a history that far pre-dates the birth of the Latvian state, is perhaps a more recognisable brand than the country itself.

It was therefore fitting that one of Latvia’s other port cities, Liepaja, should be given the opportunity to set out its wares before a London audience. This task fell to Janis Lapins, deputy chief executive of Liepaja Special Economic Zone. A former Soviet naval base, Latvia’s third largest city is now a magnet for infrastructure and industrial investment, offering distinct cost advantages in areas such as transport and logistics, metalworking, electronics, tourism and ICT: “the industries of tomorrow with the potential for exponential growth” as the minister described them.

Finally, after a lively Q&A in which potential City investors were able to explore questions

ranging from the country’s risk profile to the degree of interaction between the three Baltic states, it was left to the British Trade Minister Lord Green to sum up.

Although not present for most of the morning’s session, Lord Green’s themes showed a significant overlap with the discussion of the morning, proof if any were needed that Her Majesty’s Government considers Latvia as a “like-minded”, progrowth, pro-business, outward-looking business culture, perhaps looking on with envy at a growth rate over double that of the more sclerotic UK economy.

As well as pointing out the frequent ministerial and prime ministerial visits to Latvia, where 800 British companies from Techhub to Costa Coffee, have already made investments, he said: “In many ways we are like minded about the way we think about what’s important in growing European connectivity, we both care about EU growth agenda, the single market, the digital single market and full-blooded implementation of the single market.”

Looking forward to Latvia’s 2015 Presidency of the Council of the EU, and the opportunities this gives to promote this agenda, he extolled a British government hymn to prosperity through trade that was exactly in tune with the Latvianinspired themes of the day.

Not least through the country’s role as a “gateway to the more complex markets to the East” as well as being “a great

57

opportunity in itself“.

“As we come out of financial and economic crisis, we have to move away from a model which relied on the domestic consumer taking on more debt, and we know we can’t rely on government spending to drive demand, it’s all about investment and more importantly trade.

“The truth is that the traditional markets [of Western Europe] may continue to be slow growing. We need to encourage companies to look further afield.

“While I encourage British business to go to the Middle East, to Asia, to Africa I also advise them to remember eastern Europe.

“These are younger economies like Latvia which have big opportunities and are more familiar territory, they are part of the EU, which helps to de-risk the decision of entering them.”

Those who take his advice, and that of the rest of the day’s persuasive speakers, will form their own opinion about whether the reality matches the rhetoric. If it does, the country’s current wave of growth will swell exponentially – but sustainably.

What Latvia’s day in the City spotlight underlined is that this nation of two million has come by its current growth story the hard way, and will do everything that a small, nimble nation with human resource whose quality is recognised the world over can do to nurture it.

Although no-one at the session pretended that Latvia does not have challenges, its successes are obvious. What’s next for Latvia is likely to be more of the same. n

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

awaiting the world If Riga’s status as European Capital of Culture is to deliver the desired boost to Latvia’s visitor economy beyond next year, much rests on Diana Civle’s shoulders. The Riga 2014 Foundation head talks to Kate Kolbina >>

BUSINESS QUARTER | WINTER 14

58

WINTER 14

59

INTERVIEW

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

We want to have as many events as possible on the outskirts of the city where people actually live

It’s phrased in more professional language of course, but Riga’s place in Latvia’s current tourism strategy is essentially this: “If you’ve got it, flaunt it!”

A Baltic showpiece for centuries, the Latvian capital remains one of Europe’s architectural jewel cases, combining the spires and fortifications of a thriving mediaeval Hanseatic port, with the rich fancies of late-19th / early 20th Century art nouveau.

All of this heritage will be put under the spotlight when Riga becomes the third Baltic capital to win the prized European Capital of Culture accolade, following Vilnius in 2009 and Tallinn in 2011.

Latvia’s economic planners are hoping that the year-long series of events will add lasting value to the Latvian brand, boost the €1.44million or so annual foreign overnight visitors (plus 4m daytrippers), and most importantly, increase the LVL 308m (€476m) they pump into the recovering local economy. Although

BUSINESS QUARTER | WINTER 14

the headlines from the cultural extravaganza will be all about Riga and Latvian excellence in performance, the visual arts and architecture, areas where this country more than holds its own in European terms, Riga 2014 is about much more than “art for art’s sake”.

The Latvian Tourism Marketing strategy 2010-2015 makes clear the need to make more of the attractions of Riga as the gateway to Latvia, an aim shared by officialdom from the Prime Minister Valdis Dombrovskis downwards. The PM has said that he sees Riga 2014 as “a great opportunity for Latvia and for Riga to present its cultural riches. We believe there are plenty of them, and they still need to be better promoted”.

According to Latvian Tourism Development Agency’s Marketing Strategy 2010-2015, much rides on Riga’s ability to pull in visitors, to drive an increasingly sophisticated nationwide tourism offering based on heritage, old craft skills,

60

environment and ecotourism.

As European Capital of Culture 2014, Riga will host a year-long programme of events, budgeted at €24m.

Of this, 40% is provided by Riga City Council, 35% from the Ministry of Culture, 10% from sponsorship and the rest from EU funds. The year will have the double goal of boosting Rigans’ pride in their unique environment, and of drawing in more foreign visitors, keeping them here for longer, and dispersing their spending power around this small, and – Riga 2014 organisers stress – highly accessible nation. There are, for example, high hopes of drawing modern art pilgrims to Daugavpils where a major new destination museum of the works of the great Latvian-American abstract expressionist painter Mark Rothko opened in April 2013, in a former castle arsenal. “When it comes to tourism, Riga is sold out anyhow

WINTER 14

every summer” says Diana Civle, the wellknown Latvian arts administrator who heads the Riga 2014 Foundation. “The numbers dipped from 2009-2010 when we had the economic crisis but now we are back to fully booked out hotels. But we want people to know that it’s worth coming to Riga in winter or spring or autumn, we want to make people stay longer. We are too much a ‘weekend break’ kind of city.”

After years in the planning, the programme that Civle and her colleagues have put together is carefully designed to integrate existing cultural events and to draw people to the capital from far and wide throughout the year. Civle says that part of the competitive pitch to the EU was the insistence on Riga 2014 being a democratic festival, that would not be shunned by locals who assumed that it was all about opera, ballet and other so-called

‘elite’ spectacles. This is more of a challenge for Riga, which carries the heavy historical weight and expectations of over 800 years of civilisation, compared to smaller, more youthful and strategically nimble cities such as Umea in northern Sweden, which will share Capital of Culture 2014 status with Riga.

“Even when we have events at places like the Opera House we will make sure that there will be big screens outside so that people can see it for free. Says Civle: “This is important.

As much as we are able to, we are arranging events that people can come to for free. We are keen to involve Rigans themselves. We want to have as many events as possible on the outskirts of the city where people actually live. People don’t live in the centre where the big cultural places are located.

“Our idea is to make it so that if you are in a suburban park walking your dog you

61

INTERVIEW

can encounter something that draws you to say ‘what’s this? What is happening? ah, that’s interesting’. We want to make the point that culture is for everyone, it doesn’t have to be something complicated, and incomprehensible, it can be fun.”

For much of this year Esplanade Park in the centre of the city has been home to a Riga 2014 pavilion, an open-walled greenhouse-like space designed to whet appetites for next year’s attractions and to emphasise the organisers’ point that this event is for everyone.

Ulrich Fuchs, deputy director of the current Marseilles City of Culture 2013 and a veteran of several European City of Culture managements, including Bremen 2002 and Linz 2009, is impressed with the preparations, but stresses that the event will be what people make of it. “Riga’s programme is >>

BUSINESS QUARTER | WINTER 14

INTERVIEW

WINTER 14

a nearly perfect combination of tradition and innovation,” he says.

“There is never a guarantee of success for any Capital of Culture. All stakeholders in a city have to work hard to prepare for such a big challenge.“ the programme will include January’s rare performance of Wagner’s opera Rienzi, written during the German composer’s youthful sojourn in Riga, the World Choir Games international singing competition in July, and a range of exhibitions inside the former KGB headquarters, which will reveal its sinister secrets when it is thrown open to the public for the first time in April.

While it is by no means automatic that European Capital of Culture status transforms a city’s economic fortunes, there are good reasons why cities fight so hard, and jump through so many bureaucratic hoops, to have Brussels confer this honour on them.

A year in the European spotlight tends to be a catalyst for the kind of change that can give advantages in an increasingly crowded and competitive global marketplace.

But despite the gloss applied by cheerleaders for the City of Culture promoters, there are questions about how successfully the other Baltic capitals exploited their year in the cultural limelight.

Estonian market research company Emor showed “no major changes” in activities by foreign visitors in 2011 in Tallinn compared to 2008. Overall satisfaction with the visit remained similar to the (quite high) 2008 level, and a modest 16% of all the tourists visited Tallinn 2011 events.

Vilnius had the severe misfortune to be cultural capital during financial crisis in 2009, which of course had a negative impact on visitor numbers, as well as financial support for the programme. The event was also tainted by accusations of excessive politicisation, and the

lasting legacy of the events fell short of what was hoped for.

With the legacy of that crisis still in evidence, the Latvian Government makes no bones about the need to pep up the visitor economy, against a background of slowed but persistent net emigration.

The aforementioned tourism marketing report lays out this challenge with an admirable lack of the jargon and obfuscation characteristic of official reports: “The Latvian tourism industry faces problems related to the poor quality of products and services, marked seasonality – or the lack of year-round trade – and the resulting fluctuations in the turnover of tourism business, insufficient cooperation at all levels, the rapid increase in the VAT rate, and the lack of a single development vision” it warns.

“Irrespective of these aspects tourism in Latvia is considered to be one of the possibilities of national economic development and priorities of service industry since tourism is a significant source of export income making a considerable contribution to GDP.” While it is hard to know in advance how well the reality of Riga’s big year will match hopes and expectations, the mood is positive, notwithstanding minor disasters like the failure to complete the renovations of the National Museum of Latvia and the Museum of Occupation. This means that these major components of Riga’s tourism offering will be closed to visitors throughout 2014.

According to Ulrich Fuchs, there is all to play for in the city on the Daugava River: “Some cities in the past failed to capitalise on the opportunity, others have managed to translate it into ten years-worth of urban development.

“It should be an event as much for Rigans as for visitors. It gives an opportunity to strengthen citizens’ pride and to attract a new audience of tourists, the ones who are

It gives an opportunity to strengthen citizens’ pride and to attract a new audience of tourists

BUSINESS QUARTER | WINTER 14

62

interested more in content than in consuming beer and fast food.”

With luck, the sellers of beer and fast food will also have a bumper year.

The good news for Latvia’s recovering economy and for its small businesses, is that the hundreds of thousands of visitors who will come to Riga to feed their souls with art and culture, will also need to fill their stomachs, and rest their heads. n

Some highlights of the Riga 2014 “Force Majeure” Programme 17-19 Jan. Opening Event. Latvian National Opera performance of Rienzi

by Richard Wagner. Multimedia concert performance directed by acclaimed Danish director Kirsten Dehlholm.

18 Jan. Chain of Books. A human chain extending from the old National Library to the new building on the opposite bank of the Daugava River.

21-23 Feb. Riga Winter Carnival. “A completely new component of urban culture on a European scale.”

30 April-Sept. Culture reinvents former KGB Building. Series of exhibitions in the newly-opened former townhouse, HQ of the dreaded secret police during the Soviet Occupation.

6 July. Born in Riga. Famous musicians from the city give a gala open-air concert in front of the Opera House.

14-18 Nov. Light Festival Staro Riga 2014.

Installations all over the city, during which landscape is transformed by light and video technologies.

13 Dec. European Film Awards Ceremony End of Dec. Force Majeure Closing Ceremony. Large scale performance reflecting on the “feeling of pride for what was achieved during the year.”

WINTER 13

COMPANY PROFILE

Burgeoning port set for growth A GROWING port in the North East of England is set to establish itself internationally after a buoyant period of trading and a host of major new development projects.

Port of Sunderland, a municipal port located on the North East coast of England, is looking forward to building on a successful few years, having completed a number of infrastructure improvement programmes, and invested in a heavy-lift crane, to attract further custom nationally and internationally.

Matthew Hunt, director at Port of Sunderland, believes that the port is in a strong position, after a raft of developments to unlock its potential.

The strategic acquisition of areas of the port previously operated by independent businesses,

demolition of disused buildings that were occupying space, resurfacing of roads and yards adjacent to deep water quays and heavy duty crane pads and ro-ro facilities that make better use of space at the port, are just some of the projects completed that Mr Hunt believes position Port of Sunderland well for investors. The port has also added to its handling capabilities with the purchase of a LHM 420 Harbour Mobile Crane via international crane manufacturer Liebherr to add to the Liebherr A944C HD materials handling crane purchased last year.

Mr Hunt said: “The port has always had significant potential, and the projects we have undertaken have been about unlocking that, making some relatively small changes that will deliver big benefits.

Port of Sunderland: immediate access to the open sea Sunderland’s coastal location has always played a huge part in its economy. The city’s port is ideally situated, with immediate access to open sea and three kilometres of river and dock berths. Add to that a track record for 24/7 delivery, dynamic, commercially minded management and a ‘can-do’ outlook, and you can see why the Port of Sunderland is flourishing.

E info@makeitsunderland.com T +44(0)191 553 2100 W makeitsunderland.com

“There are a number of very visible changes to infrastructure at the port like the purchase of a 120 tonne capacity harbour mobile crane – along with some more subtle changes that people may barely notice, but the sum of the parts is significant. The things we have done mean that the port is a blank canvas that is ready for businesses to come and put their stamp on.”

For more information about Sunderland and the Port of Sunderland visit www.makeitsunderland. com, email info@makeitsunderland.com or call +44 (0) 191 305 1194.

BUSINESS VIEWPOINT

WINTER 14

One should learn from crises to have a better future by Karlis Berzinš Alexander Pankov, President of Rietumu Bank, the biggest private bank in Latvia, believes that the next phase of the world economic cycle will be more controllable, low bank rates will continue in the near future and Latvia will continue to please with its success. The bank does not expect surprises from the introduction of the euro and is successfully discovering efficient solutions for the placement of capital.

Next year Latvia will become part of the eurozone. How will the European currency introduction affect the operation of Latvian banks?

Euro adoption is a significant step for Latvia and the country has been getting ready for it seriously and for a long time. In Rietumu Bank by the way, we were among the first euro optimists and several years ago we already spoke about the positive effects stemming from the introduction of the European currency. At present, such a viewpoint dominates business circles in this country.

To the government’s credit, Latvia has succeeded in fulfilling all the entry requirements laid down by the European Commission. This is the completion stage of European integration, a final seal of approval and quality mark and hence the attractiveness of our country to global investors will increase.

The banking sector of Latvia will form part of a unified financial system. We will get access to the resources of the European Central Bank on terms which are common for all member-states.

This means stability, both from a short-term and long-term perspective. It is clear that we have to continue developing and operating actively ourselves, but the external positive background will considerably facilitate this task.

I have to say to those who expect surprises that there will be none. Euro adoption will not cause

significant changes in the operation of the banks.

Incomes from currency exchange operations will reduce to a certain extent, but they can be substituted for by new opportunities.

Certainly, there is some psychological tension with regard to technologies used in the process of transferring from one currency to another.

Something like that was felt on the eve of 2000 when fear of a “millennium bug” surrounded the transition to the new century. As before, I think that everything will go to plan this time.

Memories about the crisis which the world, including Europe, has experienced are still fresh.

Have we learned the lessons?

The specific feature of any crisis is that each one is unlike the previous one. This refers not only to Europe but to all market economies. We should not cherish the illusion that the recent crisis was the last and that now we are safe forever – the cyclical nature will remain and this is stated in any textbook on economics.

At the same time, we should learn lessons from any crisis and this is what has been done this time.

Considerable amendments have been introduced in laws and regulations, the fundamental regulation of the banking sphere has been enhanced, measures making the lending process more controllable have been introduced, etc. This pertains both to the EU as a whole, and to Latvia.

The bank does not expect surprises from the introduction of the euro and is successfully discovering efficient solutions for the placement of capital

BUSINESS QUARTER | WINTER 14

64

On the one hand, we have not yet achieved the higher levels of growth and such preventive measures considerably delay the development of the economy. On the other hand, in the future they will allow a levelling of the fluctuations and a reduction of the downward movement during the next declining phase, which is bound to occur sooner or later.

This can be compared to a car’s movement down a hill, when technologies automatically provide safety to the driver and the passengers. However, it is not easy to move uphill by the same mode.

The chief task of the government is to secure that measures taken are balanced in nature.

What is happening in the Latvian economy at present? What tendencies will prevail?

The situation in Latvia is much more favourable than was predicted by many gurus of economics a few years ago. Certainly, Latvia has suffered during the crisis period. However, like any small open economy, it had the possibility to recover easily.

To overcome the crisis, the right political decisions were primarily required. In Latvia, these were legislative changes directed to the attraction of foreign investors and a number of other decisions.

It must be noted that with all the plurality of opinions, our government acts in a constructive way. The result is shown by the macroeconomic statistics – with regard to the rate of development, Latvia is the highest in the EU, and, in accordance with the forecasts of the Ministry of Economics, GDP this year will grow by 4.5%.

Among the main factors of this growth, financing from European funds should be mentioned, which

WINTER 14

BUSINESS VIEWPOINT

is used for the development of infrastructure, transport, agriculture and other areas. Export is growing and the balance of trade is improving.

There are certainly negative moments as well.

There is still a rather big portfolio of “hung up” assets in real estate, and the funds, which are repaid by borrowers in accordance with the longtime loans, are withdrawn from the economy by the banks with foreign capital – initially these were the funds from holding structures lent to their Latvian subsidiaries.

Next year will also be positive. Our country, in spite of its small geographical dimensions, has excellent potential.

Rietumu Bank works a lot with clients from Russia. How do you evaluate the relations between the two countries? Does the political context help or hinder in this regard?

Today relations between Latvia and Russia are quite stable. They have been developing steadily and progressively over recent years. And in no way do they hinder businesses. Undoubtedly, active support of our economic cooperation on the governmental level would be a useful additional impulse, but even in the current circumstances we operate efficiently.

We also see a lot of positive examples in the environment of our clients – entrepreneurs from Russia find new business partners in Latvia and vice versa. Business ties are developing and new joint ventures are opening.

What is the situation with Russian investments?

These can be divided into two categories – corporate and personal investments. The first are dictated by business interests, they are much more large-scale and mostly comprise transactions on the acquisition of undervalued assets. In absolute terms, the number of such transactions for obvious reasons is quite small, but each of them is noticeable.

The second type of investment (which is talked about a lot and frequently) is investments of private individuals into real estate and the banking sector. Such investments are often the basis for obtaining a European residence permit. By the way, a number of such buyers are persons who later make investments of the first type – into business, and this is an important moment.

When looking at this as a whole, private investments from outside undoubtedly bring

with having a low yield. Therefore, we have to search for new solutions, which in the conditions of high rates on the market could seem too complicated and hence, not very attractive. But now every possibility has to be considered. As an example, I can mention transactions on the sale of a part of the credit risk and other similar products.

In this context, a recent proposal of Rietumu Bank is indicative – a special programme is developed for a limited issue of preference stocks with an attractive return.

Alexander Pankov

considerable benefit to the economy. According to Deloitte estimates, due to the programme of providing the “investor’s” residence permits, the Latvian economy has already received EUR 780 million which is a considerable amount for us.

Is there currently a problem with the reputation of Russian capital in Latvia? We can refer, for instance, to the bankruptcy of Krajbanka, which had a shareholder from Russia.

The reputation of capital has always been significant, both before and after the bankruptcy of Krajbanka. In Rietumu Bank, we tackle this issue very thoroughly with regard to capitals of any origin, not only Russian.

How long will the low rates situation remain in your view? And what are the possibilities for the placement of funds?

I don’t think that anything will fundamentally change in the nearest future. There are not very many ways to overcome a crisis, apart from issuing currency and the policy which we are now witnessing.

It is clear that owners of capital are not pleased

65

Can we find out more details about this programme?

We plan to issue 15 million preference stocks in the first quarter of next year. The return on these stocks will comprise annual dividends and participation in the general growth of the bank’s capital. 50% of the profit received by Rietumu Bank, reported to be one of the highest in the industry, is forwarded annually for the payment of dividends. According to our estimates, over a five year horizon the expected return on these securities will exceed 20%. The minimum annual return is determined as 5%.

Furthermore, Rietumu Bank will retain its traditional conservative approach to the placement of funds and risk assessment. This programme will allow the bank to lay a new foundation for further growth and to use current advantages on the market.

To whom will you make such proposals?

Primarily, we will offer these stocks to our existing clients, who like many others are now searching for opportunities for the reasonable, considered and at the same time, gainful placement of their funds.

How is Rietumu Bank doing today? Are there any changes planned in your approach to business?

Rietumu Bank is developing in accordance with its fundamental principles and plans. We do not plan to change anything in our model – for all its conservatism, it is very efficient.

This year has been good to the bank in every respect – our client base has increased noticeably, as well as the volume of funds attracted, and the return has grown. With all of that, we believe that our current results, though good ones, are not our biggest success. We are at the start of a very interesting path and I am sure that there are new challenges and new achievements for us ahead.

BUSINESS QUARTER | WINTER 14

FASHION

waxing lyrical Barbour’s managing director Steve Buck tells Josh Sims about the iconic clothing brand’s evolution from fishing boats to the world’s fashion hotbeds “The North East of England is a cold, wet, grey place,” says Gary Janes, doing little for the local tourist industry. “But we love it. That said, it does come with certain demands.”

Protective clothing might be one, which is why the area is also home to an icon of menswear: the waxed jacket.

Founded in South Shields by Scotsman John Barbour and 120 years old next year, Barbour is still independent and still making jackets for the horse-and-hound set with which it has come to be most closely associated - “that dream of life in the British countryside that appeals more internationally than it does at home,” offers Steve Buck, the company’s managing director for the last decade.

BUSINESS QUARTER | WINTER 14

Yet it might be time for that stereotype of Range Rover, tweed and labrador to hang up its wellingtons. Barbour’s latest incarnation is much more slick, adding to its authorised Steve McQueen and its International biker style (also now set for development next year) to create styles more for bar and boardroom than field and paddock, its Royal Warrants with Queen Elizabeth and Prince Charles notwithstanding.

Having appealed to a more fashion-conscious shopper with its Beacon Heritage collaboration with Japanese designer Tokihito Yoshida, now Barbour has teamed up with Savile Row’s it-tailors Norton & Son (whose chief is Patrick Grant, lately on the BBC’s ‘Great British Sewing Bee’) on a new, >>

66

FASHION

67

BUSINESS QUARTER | WINTER 14

FASHION The target here is the aficionado who likes clothes not everybody else has

on-going line of sharper, 11oz waxed jackets - including a velvet-collared single-breasted, hunting jacket-style, quilted jacket and calf-length all-weather waxed overcoat - as well as Guernsey and other chunky knits, blazers and shirts. It really takes Barbour where it hasn’t been altogether at home before: onto smart city streets, albeit ones that are as much prone to chilly winds and downpours as country lanes.

“We like collaborations to challenge pre-conceptions without shocking anyone - besides, I’m not sure that country stereotype with which we’re associated really exists. You’re as likely to see Barbour wearers in Gucci loafers as much as wellies,” explains Buck. “And his collaboration deepens our story as a British brand and aims to show that our normally rugged style can be more refined and tailored.

The target here is the aficionado who likes clothes not everybody else has. The thing that has amazed me working

BUSINESS QUARTER | WINTER 14

for the company is that everybody has a point of view - that can be a strength, but it also makes it difficult to do something new.”

But with its Beacon Heritage Norton & Sons line, Barbour has hit that target with what is the most successfully styleconscious collection it has devised in years, albeit one based on considered tweaks of archive pieces. “That’s really the beauty of any Barbour jacket - it’s less designed as evolved, with details added bit by bit,” suggests Janes, its co-creator.

It certainly moves the company on from its more traditional, country style and returns it more to its industrial roots outfitting fishermen, dockworkers, later even submariners and, during the Falklands Conflict, the Cowan Commando jacket for special forces. This is a long way from the ‘Horse and Hound’ set.

Not that the country image has not been a beneficial one - >>

68

FASHION

69

BUSINESS QUARTER | WINTER 14

FASHION

We’re half way along that path from being a manufacturing company to a lifestyle brand

BUSINESS QUARTER | WINTER 14

70

FASHION Barbour in the Baltics: Tallinn: SfääR Store Mere puiestee 6E. Riga: Peek&Cloppenburg Mūkusalas Street 71

it was Dame Margaret Barbour, chairman of the family firm, who designed the benchmark Bedale style of jacket and drove the Sloane Ranger image overhaul that first saw Barbour on the backs of aspirational urban folk 30 years ago. But perhaps that has run its course: time to reappraise the waxed jacket as utilitarian chic - a Swiss Army knife of outerwear with, thanks to a Savile Row injection, a smarter casing.Indeed, it is not just the jackets that are pushing on. The company is expanding too, which is good news for the north east of the UK. A fifth line will be added later this year to its four lines of 20 seamstresses - and one solitary, brave seamster - in order to meet growing demand. These are the women - and one man - who together assemble some 140,000 jackets a year, many with those distinctive characteristics: the check lining, bellows pockets, the throat latch, the cord collar, ring-pull zip and, of course, the waxed cotton (the wax prepared,

Coca-Cola-like, to a secret formula). And, behind the scenes, its repair service may give new life to well-worn jackets to which their owners are too attached to let go - making the occasional find in the pockets, including, on one occasion, the key to St James Palace. But actually waxed jackets now only account for 30% of Barbour’s sales by value, albeit that still amounting to a hefty chunk of £122m. There is, it seems, good business beyond the wax.

“Without wishing to use cliche we’re half way along that path from being a manufacturing company to being a ‘lifestyle brand’,” says Buck. We try to appeal to more fashion and more mainstream consumers and neither seems put off by the other - all seem happy to be part of the broader brand. We want to keep growth gradual.

Besides, there’s no exit for the brand since Dame Margaret wants Barbour to be family-owned forever.” n

71

BUSINESS QUARTER | WINTER 14

GALLERIA RIGA shopping centre Dzirnavu iela 67 Entrances from Dzirnavu iela 67 and Blaumaņa iela 10 (between Brīvības bulvāris and Tērbatas iela) Information centre Tel. (+371) 67307000 info@galleriariga.lv

Photo from Max&Co, Galleria Riga 3rd floor

Since it opened in 2010, the Galleria Riga has found a place in the hearts of Riga residents and visitors. It’s a shopping centre, which also happens to provide great opportunities for relaxation and entertainment iBlues,women’secret, Cortefiel, Springfield, Karen Millen, Oasis, Parfois, Ecco, Mango, Marella, Gino Rossi, Suitsupply, Baltman, Diesel,Triumph, Ioanna Kourbella, John Galliano, Alexander McQueen (the last three brands are available at the mon chéri store), Piazza Italia and many more.

The shopping centre has a built-in parking garage (free parking for two hours on Sundays) and special stands for bicycles. Guests have use of free wi-fi and can take full advantage of Global Blue tax-free shopping scheme.

Those in a hurry, or who would rather place their trust in a professional, can shop with a personal stylist who will help find the best outfits that suit your style and needs, as well as the seasons trends.

The Galleria Riga is located in the heart of Riga. A wide variety of shops

Other handy services at the Galleria Riga include a post office, dry-

line its seven storeys, providing visitors with all the choice they need. Here

cleaning, currency exchange and beauty salons. A favourite spot for guests

you’ll find both daily necessities and items for those special occasions.

to stop for a moment’s rest is the landmark fountain, which offers a great

At the Galleria Riga you can buy big brands like Stefanel, Max&Co,

view of the building’s elegant architecture.

01

04 02

03 05

STYLIST COLUMN 13 06

12

Personal stylist Anita Altmane not only helps to work on your image and reboot your wardrobe, but she will also save you time by helping you navigate the Galleria’s rich array of shops.

11

01 Dress KAREN MILLEN 158Ls/224.81EUR 02 Perfume Xerjoff Join The Club, KRISTIANA EDP 50ml 96Ls/136,60 EUR 03 Boots GINO ROSSI 219.99Ls/313.02 Eur 04 Sunglasses Prada PASAULES OPTIKA 235Ls/334,37 EUR 05 Scarf MANGO 17.99Ls/25.60Eur 06 Purse CORTEFIEL 59,99Ls/85,36EUR

Does having a private stylist sound like an unattainable dream? Think again.

Right now the Galleria Riga is offering this exclusive service to guests completely free!

07 Belt IVO NIKKOLO 39,90Ls/56,77EUR 08 Coat MAX&CO 289Ls/411.20 EUR 09 Skirt MAX&CO 95Ls/135,17 EUR 10 Coat MAX&CO 289Ls/411.20 EUR 11 Purse PARFOIS 22.99Ls/32.71EUR 12 Low boots GINO ROSSI 108,23Ls/153,99 EUR 13 Bracelet PARFOIS 8.49Ls/12.08 EUR

08

10

07

In Galleria Riga you will find high street prices and highend global brands. During the conversation stylist will also tell you how to shop smart, not to get confused by discounts and how to find those items that not only suit you, but you will look back on as wise long term investments.

The art of dressing is accessible to everyone, you don’t have to be rich or famous to look great!

We speak Latvian, English and Russian, and our consultations take place in the cozy rooms on the 6th floor of Galleria Riga.

To make an appointment, phone: +371 27543435 Anita Altmane Head stylist, Galleria Riga

09

EQUIPMENT

BUSINESS QUARTER | WINTER 14

74

EQUIPMENT

a roller that bites 75

After the Phantom and the Ghost comes the Wraith in Rolls Royce’s drive to remain relevant to the global jet-set, says Josh Sims >>

BUSINESS QUARTER | WINTER 14

EQUIPMENT

BUSINESS QUARTER | WINTER 14

76

EQUIPMENT The name is perhaps the first indication of the gap Rolls Royce is seeking to fill in its portfolio with the Wraith, the company’s latest step - after the Phantom and the Ghost - in its renaissance under BMW ownership from ‘Downton Abbey’ threatened irrelevance to contemporary super-brand. It is named after the company’s two-door sports model - yet one with serious coachwork - of 1938. “And certainly the Wraith is following in that heritage,” says Giles Taylor, Rolls Royce’s design director. “The name was actually decided on not long before its launch, but perhaps ‘Wraith’ was always destined to end up on this creation.

It’s a very fast, very comfortable, two-door, true four-seat fastback - which hasn’t been done before. It really is a new kind of car for Rolls Royce, but relevant to our customer.”

That’s a customer who is younger, sportier, more style-conscious, who’s after a more ‘feel it in the pit of the stomach’ driving experience but without losing Rolls Royce’s celebrated ‘waftability’ - “the power to give great, effortless pace, but also silence in the cabin and a distinctive cushioning,” as Taylor describes it. “A car like the Wraith is all about capturing modernity in a timeless way, without wishing to sound contradictory. It’s what Chanel does in fashion. It’s now but it’s also classic. I’d go so far as to to say it’s my favourite of the new generation of Rolls Royces - it just has ‘it’, that sense of glamour.”

Certainly the Wraith’s stats are impressive: a 624 bhp twin turbo V12 giving 0-60mph in 4.4 seconds, making it Rolls Royce’s most powerful drive-train to date. So too the tech: the debut for Rolls Royce of SAT or Satellite Aided Transmission, for example, which processes GPS data to predict the driver’s next move and automatically select the right gear for the road

A car like the Wraith is all about capturing modernity in a timeless way

ahead, thus avoiding unnecessary gear changes and giving smoothness of ride. Navigation is voice-activated and can be app-controlled from a smartphone. Speaking of which, it also has an iBrake, a radar/camera-based system that assists in emergency stops.

But the Wraith is no ‘gentleman’s club on wheels’, as Rolls Royces have often been described, though gentlemen may still apply for ownership. Indeed, Taylor doesn’t go so far as to recommend string-backed driving gloves,

77

pipe and cravat, but he does rather reckon his new design is “very much suggestive of the gentleman’s gran tourismo, of the classic GT era of the 50s and 60s, which is perhaps a rather romantic idea, but it does seem just right for getting from Mayfair to Monaco and allowing you to turn up looking the part.”

Of course, passing through Mayfair one would be hard not to at least see some connection between the Wraith and a gentleman’s club after all - and that is both the refinement >>

BUSINESS QUARTER | WINTER 14

EQUIPMENT

of the Garrick variety and the sexiness of the Raymond Revuebar kind. Certainly the Wraith’s interior is not short of leather, although the company prefers the comparison of a luxury yacht than an old Chesterfield sofa. And Taylor is enthused by the large door panel in onepiece wood veneer - specifically Rolls Royce’s new open grain wood treatment, Canadel panelling - the largest of its kind in the industry, he suggests. Even the grain is angled to give a sense of forward momentum.

Such details are to be expected, both from Rolls Royce and at Rolls Royce prices.

More important, for the Wraith and what it represents at least, is that sleek, almost aggressive exterior, which took some inspiration from Taylor favourite classics the likes of the Maserati A6G, Maserati Ghibli, Aston Martin DB4 and DB5. The Wraith is shorter and 50mm lower than the Ghost, enough that the driver feels closer to the ground - although while any other car design looking to suggest speed would reflect light from the under-carriage to further suggest a car hunkering down, the Wraith, Taylor notes, sits up. It floats rather than prowls. The grill looks like a real air intake too - because it is - “and not a decorative touch, which is true for other Rolls Royces,” he adds. The car’s upper and lower halves being in different tones gives it a nautical effect, one emphasised by frameless coach-doors and the lack of a B-pillar (which can make for an exhilarating ride all windows down). And,

BUSINESS QUARTER | WINTER 14

perhaps most strikingly - and certainly what gets its designer most animated - is the Wraith’s one strong, unbroken line bisecting an already sleek silhouette.

“It has a sense of clean architectural surface language,” as Taylor puts it in designer-speak, meaning, in short, that the whole look hangs together with a minimum of fuss to distract the eye. “Look at the side of the car and there’s a very strong sense of linearity to it - which was actually a real challenge. There’s nothing extraneous. The Wraith is definitely a very modern but crafted contemporary piece of design of the kind that Rolls Royce customers are looking into. As a company we now stand for nicely modern cars - but we can go another step without starting to lose out to the fashionconsciousness there is in car design now.”

Taylor is presumably working on taking that next step now. But he isn’t saying in which direction he’s pointing or how big a stride he may take. n

It really is a new kind of car for Rolls Royce, but relevant to our customer

78

EQUIPMENT

Nearest Rolls Royce dealerships: Warsaw: Rolls-Royce Motor Cars Warsaw Ostrobramska 73 Berlin: Rolls-Royce Motor Cars Berlin Hindenburgdamm 68 Dresden: Thomas Exclusive Cars GmbH, Meißner Straße 34

79

BUSINESS QUARTER | WINTER 14

REAR VIEW

WINTER 14

with Charles Cormack People often ask me what I do for a living.

My usual reply is I run an international business development consultancy, but what I really ‘do’ is spend every day speaking to business people from around the world, extolling the virtues of the Baltic States.

After 14 years you would have thought I might be getting bored, but I’m not. I look back to my first visit in 1999, and the opening of the first office a year later, and I see the progress the three Baltic States have made despite some tough times, I feel proud to be involved in introducing these remarkable countries to people who knew nothing about them.

Don’t get me wrong, doing business here can be frustrating, the people can be stubborn, and building trust takes time.

You need to know the recent, often tragic history of the region to get even a little way into the Baltic mindset.

Nevertheless, what these countries have achieved in the past 22 years is nothing short of amazing. From being vassal republics of the crumbling and oppressive Soviet Union to modern robust European democracies, they have stood against the worst economic crisis for a century, and survived.

Many more established EU members could look at this achievement and learn lessons.

But the point of this column is not merely to heap praise, but to talk about some of the key areas for companies looking for opportunities.

One slightly unusual sector where I am seeing a lot of activity is the trend for international

BUSINESS QUARTER | WINTER 14

slow and steady wins the race companies looking at developing research and development (R&D) teams in the markets.

Obviously to many companies R&D and innovation is a vital component of their business, but as the return on investment may be some way down the road, it is also the area that gets cut in hard times.

I saw this a few years ago and started talking to UK companies about the potential of developing R&D in the Baltic, as it has a range

This means the jobs stay and the new ones are created at a more sustainable pace of compelling advantages. Not only is there a ready supply of highly educated people, there are distinct cost advantages, excellent facilities, a strong university base, and of course – if the proposition is properly structured - grants to support projects.

The Baltic governments have recognised that their one real natural resource is their people.

They have spent many millions developing the necessary business infrastructure to support the R&D sector.

I would single out Lithuania in particular. This

80

country has stated its ambition to become the northern European R&D hub by 2015, and backed that with over one billion euros of investment in commercialisation infrastructure through the development of the academicindustry science ‘valley’ programme.

But Latvia and Estonia are also putting themselves on the R&D map. Latvia is in the process of launching a major new green technology incubator, based in Riga and will look to further develop the already high level of expertise in the green technology sector.

At the moment my company CCG is working with eight companies from the UK and USA who are in the process of developing their R&D activities in-market.

One has already taken the plunge, and established two subsidiary companies in Latvia, and is developing a range of products linked to the European Space Agency. I expect the next two to make the move within the next month or so.

To me this is the perfect type of inward investment for the Baltic States.

Large manufacturing inward investment comes and goes, and is always moving to the next low cost destination.

R&D offers serious high quality jobs, and is seen by companies as a key part of their strategic development. This means the jobs stay, and new ones are created at a slower, more sustainable pace. Having lived through the Baltic roller-coaster of the last few years slow and sustainable sounds good to me! n

Contact us: advertising@tll.aero

EVENTS

WINTER 14

BQ’s business events diary gives you lots of time to forward plan. If you wish to add your event to the list send it to colin@bq-baltic.com and please put ‘BQ events page’ in the subject heading

NOVEMBER

JANUARY

13-15 Innovators and engineers will converge on Tallinn from 13-15.

November for the PrevNext 19th Tallinn international fair Instrutec 2013.

Estonia’s strategically important, innovative industries include the machine, metal and appliance construction sectors. Instrutec 2013 gives an overview of the present condition and development potential of Estonian metal, mechanical engineering, instrument-making, timber and sawmilling industries, and introduces the newest scientific, technical and technological advancements in the field.

01 Riga becomes European Capital of Culture 2014, starting 1 January, with a full year ahead of activities ranging from concerts, to theatre programmes, to art exhibits and environmental projects. Early highlights include Latvian National Opera’s performance of Wagner’s Rienzi (17-19 January), the Chain of Books (18 January) a human chain transferring books from the old to the new premises of the Latvia’s National Library.

22-24 Riga Comm 2013, the “Information and communication technology fair and conference,” will be held from 22-24 November at the Kipsala International Exhibition Center. The fair brings together ICT professionals from around the Baltics and beyond, with this year more than 3,000 “purposeful buyers, potential partners and ICT professionals” expected to attend. Visitors gain insight into the latest Baltic ICT solutions and services, meet with potential business partners, suppliers and developers.

27 and 29 Over 500 prospective franchisees from the Baltics are expected to gather in Vilnius on November 27 and Riga on November 29 for one of Europe’s largest franchise fairs, Brand4Baltic. The organisers Advanced Advice, Lithuanian Franchise Centre and Lithuanian Business Employers’ Confederation have stated a goal of matching up to 40 franchise concepts with at least 500 prospective investors.

28-29 Lithuania will host the 3rd Eastern Partnership Summit in Vilnius on 28-29 November. the biggest multilateral political event during Lithuania’s six-month Presidency of the Council of the EU, and is one of the biggest EU foreign policy this year. Twenty-eight representatives from EU member states and six Eastern partners - Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan - as well as EU representatives will meet in Vilnius. At the Summit the EU hopes to initial the Association Agreements with Armenia, Georgia and the Republic of Moldova, and sign the Association Agreement with Ukraine.

DECEMBER 3-5 Shutdown forum will take place in Vilnius with the moto “Better to prepare and prevent than to repair and repent”. Shutdown is a planned stop of a process for maintenance or other reasons. Emergency break down of the processes is also an unplanned form of shutdown. The main aim in the conference is providing feasible solutions to decreasing the duration, or even eliminating the need for the stopping of equipment and manufacturing processes by reviewing and studying best practices in different industries and training workshops. The conference will be especially useful for technical and maintenance managers, production managers, engineers, etc.

13 The RMS forum conference organizers will hold this year’s Audit, Taxes and Accounting 2013 meeting on 13 December in Radisson Blu Daugava, in Riga. This, its 16th international conference on the issues, bringing together industry leaders to discuss the latest trends and developments.

13 A one-day conference exploring Nordic-Baltic financial linkages and challenges will be held in Tallinn on 13 December. It will bring together high-level policy makers from the region and local and international experts to discuss the key challenges facing the Nordic-Baltic financial sector.

Speakers will include regional central bank governors and supervisors, senior European policymakers, representatives from the regional financial sector, and IMF staff. The day will be divided into three thematic sessions and a concluding panel discussion. More detailed programme could be found on IMF web page.

BUSINESS QUARTER | WINTER 14

24-26 “Everyone can travel!” claim the organisers of the 2nd international tourism, leisure and sports exhibition ADVENTUR 2014 in Vilnius. The exhibition aims to connect tourism business professionals directly with travelers. This year, emphasis will be put on travelling with kids and breaking the myths that it is impossible to travel with babies. Is it possible to go pilgrim travelling, to visit exotic countries, to travel by bicycles with kids?

These and lots of other questions will be clarified during three days of the expo.

FEBRUARY 6 Seed Forum will happen in Vilnius, and it is also scheduled for 20 February in Riga and 4 March in Tallinn. It is the investor matchmaking forum which happens in 30 countries worldwide. The companies pitching to investors are nominated, trained and selected in the Seed Forum process to secure that the companies are investor-ready when they are pitching to investors. Pitch training seminars will happen on 3-10 February in all three Baltic capitals, so don’t miss a chance.

7-9 The International Travel Trade Fair “Balttour 2014” takes place from 7–9 February at Kipsala International Exhibition Centre. More than 250 exhibitors and 600 participating organisations from 40 countries of Europe, Central Asia and the Middle East are expected to be there for holidaymakers and travel trade professionals.

14-16 Tourest, the oldest travel exhibition in the Baltic States, is scheduled to take place in Tallinn on 14-16 February. This year’s record-breaking attendance - 36,316 visitors during three days - is expected to be surpassed.

Over 400 exhibitors representing tour operators, travel agencies, hotels, restaurants and others from around 25 countries give an overview of what the industry has to offer.

20-23 Vilnius’ bookworms and publishers get ready for the 15th international Vilnius Book Fair, held on 20-23 February. The 2014 Book Fair will highlight classical literature, with questions like - Is classical literature immortal? What does it mean to each of us? Do we understand the same books the same way? What are the topical problems we are looking for in classical literature? - highlighted in a discussion and seminar programme.

The Fair will be dedicated to the 300th anniversary of the birth of the most prominent Lithuanian author, and father of Lithuanian classical poetry, Kristijonas Donelaitis.

Please check with contacts beforehand that arrangements have not changed. Events organisers are also asked to notify us at the above email address of any changes or cancellations as soon as they are known.

82

We use a special tool to make silverware this fine.

It’s called a hand. at the end of the hand is one of our craftsmen, skilled in the silversmith’s arts of raising, chasing, polishing and engraving. we’ve had our own silver workshop since 1866. from candlesticks to quaichs, decanters to vases, wine coasters to hammered bowls, handmade is our hallmark. while many of our techniques and tools have barely changed in over 140 years, our designs are contemporary, innovative and award winning. come and see us, we’ll be happy to show you round. as you’ll discover, when it comes to creating exciting new silverware we’re old hands.

87 george street, edinburgh eh2 3ey telephone 0131 225 4898 52 beauchamp place, london sw3 1ny telephone 020 7589 3215 www.hamiltonandinches.com