LIAA: If we manage to get the virus under control faster than Western Europe, our exporters might have new opportunities

Investment and Development Agency of Latvia (LIAA) is currently working together with exporting industry associations to identify the effects of crisis on Latvian businesses. As LIAA Director General Kaspars Rožkalns told in an interview to the national information agency LETA, the industries most affected are tourism and HORECA although problems are to be expected in other sectors as well. This is why solutions for making transportation easier and encouraging local demand are being sought. Rožkalns also believes that the COVID-19 crisis can be turned into an opportunity in case Latvia has virus in hand faster than Western Europe thus giving us the opportunity to get in new supply chains. When it comes to tourism, the first step should be restoring local tourism industry.

Have the local exporters hit by the COVID-19 crisis approached you?

We are taking proactive action and have contacted almost all exporting industry associations to identify industries worst hit by the recession, as well as those that are currently “spared” but might face difficulties. This will enable us to notify Ministry for Economics and the Cabinet of Ministers on developments in export and on what we can do to about it. We have to come up with suggestions to industries that have not been hit so hard to consider adjusting the manufacturing so they wouldn’t need to seek support in two weeks.

And what are the conclusions?

No doubt, tourism and HORECA are the most affected. It’s no surprise but we also have to take extra steps to mitigate the effects in other industries. Woodworking, mechanical engineering and metalworking are at the moment spared but they are also facing order cancellations. We are working together with Ministry of Transport and identifying new logistics channels. For example, exploring opportunities to open a new ferry line for freights from Latvia to Germany to avoid truck queues in Lithuania and Poland and to maintain raw material and production deliveries.

Besides tourism and HORECA, is it possible to name other industries that are in danger? Or is the whole market facing difficulties?

The whole market is in danger. Regarding the supply chains, those that are hit the most are those being closest to the consumers. Those working with raw materials are having it easier as the end-product can be adjusted.

When looking at industries, then mechanical engineering and metal working are continuing their work but are facing problems in the future. Electronics might have to deal with decrease by 20%. Manufacturers that are producing food mainly for HORECA are hit hard, but those making products with long shelf-life are facing increase.

Some of the companies producing household chemicals, cosmetics are adjusting and making disinfectants and due to the high demand are not being able to meet it even locally.

Decrease in demand is to be expected for the textile industry. But this depends on the company’s ability to adjust as there are businesses that are embracing change. They are starting to produce safety wear and masks and can expect to have a good turnover.

This week we will start consulting companies to help them adjust. We will help them decide whether they should apply for a tax holiday at State Revenue Service or ask for aid provided by Altum. We can also share ideas on what companies in other countries are doing as well as bring them together with local importers.

It is impossible to tell the future but in case we will manage the get the virus under control by summer, what effects will it have on Latvian economy?  Will it be possible to rapidly restore supply chains?

Yes, it is hard to tell how long the negative effects on our economy will last. This is why we have to talk about opportunities. If the decade-long supply chains are broken, new companies are getting the chance to get in. It depends on how fast we will be able to mobilise ourselves and get the virus under control. If we can manage to do this faster than Western Europe, many will have such an opportunity.

In LIAA foreign representative offices we are trying to identify the broken supply chains and whether we could have a better position in them or become part in such chains we have never worked in. Asia, for example, starts to recover. Previously, they have contacted Western Europe and now nobody picks up their phone calls. This is the moment we need to take action and see an opportunity and hope in this disaster.

What messages are you getting from LIAA representative offices?

It can be said that China has the virus in hand and almost all new cases are “imported”. We can use China’s experience with turning hotels into quarantine hotels. There are still only a few cases in Japan. And South Korea starts to recover. Singapore has also followed strict restrictions and now starts to recover. We are looking at what decisions they have taken, what state aid was available and what they are doing now.

We are also having our representative offices study state aid received in Western Europe to make it compatible with aid provided by Latvia.

At the same time, there are countries in Europe that are hit harder than Latvia. I highly regard the decision of Latvian government to take serious steps even though we still had only few CIVID-19 cases at the time. Probably it will be very important in the long run.