OREANDA-NEWS. November 16, 2009. DnB NORD Banka commenced a new round of discussions on topical economy issues – "DnB NORD discussions about economics". The first discussion was focused on the future of the forestry in Latvia. The discussion highlighted the dilemma of solving contradictions between environmental and business goals, reported the press-centre of DnB NORD Banka.

Participants of the discussion – representatives of professional organizations and financiers also stressed that the timber industry as such and its prospective development in Latvia usually is reviewed through rather limited prism, though this industry bears considerable potential for becoming one of the "driving forces" of our economy in the nearest future. 

The economy expert of DnB NORD Banka Peteris Strautins in the course of discussion pointed out that in spite to the fact that the timber industry traditionally is regarded an industry with low added value, it is a wrong opinion, as the industry can operate in many ways: not only in production of raw materials, but also in their further applications in construction, power industry and other fields.

Besides, in the current situation forestry and timber industry are in rather better position as compared to other industries. Though they were ones of the very first to experience ramifications of the economic downturn, this year they can boast of major achievements to overcome the crisis. Since the lowest point at the beginning of the year volumes of timber production have grown by more than 40%, and currently is observable rise in prices, which lets us hope that in 2010 the industry will be able to materially contribute to resumption of the GDP growth.

Its contribution is considerable already now – forestry in total is accountable for some 3.5% of the GDP, which is more than, for instance, that of the agriculture, and employs approximately 4% of the labour forces. What is of particular importance - the industry provides employment to regional population. At larger scale, timber products comprise close to one tenth of the Latvian exports, though actually its role in exports should be appreciated even more, as unlike many other industries it does not import most raw materials and stuff to produce the end product. Its production, in turn, bears enormous potential in development and diversification of many other industries, e.g. production of furniture, construction, alternative power supply etc.

The president of Latvian Timber Industry Federation Juris Bikis asked to turn to the experience of other countries - for instance, that of Finland, in whose economy forestry is one the major players: strategic directions to the industry development are imposed by the authority run by the Prime Minister of the state. He also emphasized - during the recent decades technologic potential within the timber industry has considerably grown, yet it is obvious that crucial for its further development is search for the balance between the interests of the forest owners, industry representatives, and the general public. "People want the woods and wooden house at the same time - one should think how to attain both goals simultaneously," added J.Bikis.

Thinking about further development of the industry P. Strautins stressed that currently rather fragmented and unpredictable are activities of private forest owners that in general can not be described as focused on the industry needs and the development thereof: "One of the possible solutions could be vertical integration of the industry providing for consolidation of owners of big forests and afterwards - their integration with processors or own investments in further processing of their products. Similar cooperation in Sweden secures sustainable strategic development of the industry and stable timber prices."

He also expressed the opinion that in spite of the fact that since mid nineties has considerably decreased biologic variety of forms in the woods there still exist opportunities to reach sensible compromise between the business and environmental protection causes, thus ensuring that Latvian forests in the future will be distinguished at European scale by their biologic diversity, at the same time providing timber industry with raw materials.

This opinion was supported also by the Chairman of the Latvian Forest Owners' Association Arnis Muiznieks, who pointed out – forest owners already contribute to preservation of natural values by complying with the law provisions and leaving so-called eco-trees – separate uncut trees after principal clearing. In his opinion, in Latvia should be detailed environment protection requirements to achieve their compliance with economic development opportunities: "For instance, if the inspector visits the forest owner and declares that on the woods due to nest of some rare species of birds is imposed the prohibition to cut trees the owner may be tempted to get rid of such natural values. Probably it would make sense to permit selective clearing during the winter season when it would not bother the birds?" 

A. Muiznieks also agreed to the comment made by P. Strautins with regard to rather underdeveloped educational system applicable to technical industries in Latvia and lack of overall B2B (business to business) sales skills in the system of education in general. Such drawbacks without any doubt constitute hindrances to further development of timber industry, slowing down its becoming a high value-added industry that boasts diverse end products and facilitates exports.  

The export potential is the very factor that makes potential investors and financers regard timber industry as very promising industry that is worth investing. It was emphasized also by the Head of DnB NORD Banka Corporate Banking Department Raimo Smukais, according to whom, despite of the fact that lending in Latvia has considerably dropped, industries that bear high export capability, material basis of local raw materials and diverse range of products that is continuously improved and supplemented doubtlessly are the first ones to obtain funding.

Importance of exports in the future industry development was particularly stressed also by Juris Bikis, who added – if we want to be able to export not only raw materials, but also higher value-added products, e.g. furniture, our designers must apparently listen in and take into consideration the wishes of our target markets. According to J. Bikis, in case of Latvia there are two directions - Scandinavia with neat design requirements and application of natural stuff, and Eastern market with more sophisticated and demanding wishes.  

Review of timber industry and discussion about its further outlooks was the first subject of the new round of discussions "DnB NORD discussions about economics". Further on it is expected to organize such events at least four times a year.