Research study highlights financial input of the Freeport of Riga into national economy development

 

Having analyzed the data related to the cargo turnover at the Freeport, cargo structure, the Freeport of Riga Authority operation and companies, dealing with cargo handling and transportation, researchers of the scientific enterprise "Ekspertīžu un informācijas centrs" (E & IC), stated that Latvian companies get profit in the amount of 9.69 Lats per each notional ton of cargo, that is being shipped through the port. In case it is transit cargo, the amount can reach 10.32 Lats. Provided the cargo is merely exported from Latvia or imported - 7.75 Lats of profit per ton can be gained.

The Treasury gets approximately two Lats of those amounts. To be more precise – LVL 1, 5 go to the state budget, and LVL 0, 62 – to the municipal budget respectively.

For every Lat of value added, produced by the Freeport of Riga, the commercial enterprises, operating at the Freeport, can produce 7,03 Lats of value added. Provided not only the companies, that operate at the port, but also their suppliers and second tier suppliers (those that are not directly related to the port), are taken into account, the potential amount of value added might increase and reach 8,24 Lats. Researchers have identified this phenomenon as multiplier effect.

The experts, who conducted this study, came to the conclusion that these numbers indicate only minimum level of profit, gained by private companies involved in cargo transporting. In fact, applying multiplier effect, the entrepreneurs often earn even more, up to 10 Lats. "The added value, generated by the port, is the best indicator to assess its catalytic role in promoting economic growth," mentioned scientists, conducting the E&CI study.

20 researchers, employed by ”Ekspertīžu un informācijas centrs”Ltd, participated in the study, that lasted for one and a half year. The team of ”Ekspertīžu un informācijas centrs”Ltd ( E & CI ) , that worked on evaluation of the Freeport of Riga performance, is a creative research group of well-known Latvian scientists, including D.Sc. Janis Janovs, the former Director of the Institute of Economics of Latvian Academy of Sciences (he passed away last year ), Mr Janis Eriks Niedritis, a former vice-rector of latvian University, Mr Arturs Kdolins, a former Director of Tax Department of the Ministry of Finance, the economist Mr Egils Fortins, and systemology specialist Mr Romans Vitkovskis, as well as other experts and scientists.

Evaluating the Freeport’s performance and assessing operation of other related organizations, the scientists came to the conclusion that the cargo owner is the most important link of the chain. And, when it comes to Latvian port sector, it is, undoubtedly, Russia, that owns the major share of all transit goods transported through Latvia. Any changes in Russia’s economic policy will have great impact on local cargo structure and amounts.

In any case, the Freeport of Riga continues to ensure safe cargo transit and efficient handling and processing speed with the aim to provide the best services to its clients. According to 2012 data more than 36 million tons were handled at the Freeport of Riga, and due to this outstanding result the Freeport of Riga became a leading port in the entire Baltic region.

Besides, according to the scientists’ conclusions, the Freeport of Riga has a competitive advantage compared to other ports, - a lot of free territories subject to further development, while some European ports, e.g. Rotterdam, suffer from lack of spatial capacity.

“The increase in exports is crucial, and the port is the service exporter. For example, the company can have a very good accounting system in place, everything might look great, but the company is slowly dying, because it has neither resources nor development capacity. And it happens quite often. The port is a national treasure. We can talk about cooperation with other Latvian ports, but why should we change governance model? "says Romans Vitkovskis.

Some facts from the E&IC study

- One ton of marine cargo handled at the Freeport of Riga, provides an average of LVL 1,69 of value added (income) for the companies involved in cargo handling and transportation. In 2011 34,07 million. tons of cargo were handled, and port operation in the framework of cargo handling and transportation chain has provided at least LVL 57, 6 million of value added.

- One ton of marine cargo handled at the Freeport of Riga, provides an input of LVL 0, 38 to the state budget. In 2011 34,07 million tons of cargo were handled, and thus port enterprises provided no less than LVL 12,9 million for the state budget. - One ton of marine cargo handled at the Freeport of Riga by port and transport companies provides LVL 1,16 of income for the state budget. In 2011 34,07 million tons of cargo were handled, and the companies involved into cargo handling and transportation chain provided not less than LVL 39,5 million for the state budget.

- One ton of marine cargo handled at the Freeport of Riga by enterprises, operating at the Freeport, provides LVL 0, 22 for the municipal budget.

In 2011 34,07 million tons of cargo were handled, and port enterprises’ operation provided LVL 7,5 million for the municipal budget.

- One ton of marine cargo handled at the Freeport of Riga due to joint efforts of port and transportation companies provides LVL 0,62 to the municipal budget. In 2011 34,07 million tons of cargo were handled, and the companies involved into cargo handling and transportation chain provided not less than LVL 21.1 million for the municipal budget.