RIGA, November 27, 2013 – The World Bank today presented a report entitled “Review of the ports sector of Latvia: competitiveness and governance” at the Ministry of Transport of the Republic of Latvia.
The report was requested by the Ministry of Transport. Its main objective is to review the situation of the two main ports of Latvia (Riga and Ventspils), and to make recommendations in order to strengthen the ports’ competitiveness and to ensure that governance practices are in line with international experience.
The report highlights that Latvian ports are operating in a difficult competitive environment. Over the last decades, Latvia has lost market shares to its competitors, especially newly-developed Russian ports. Riga and Ventspils have responded by adopting low tariffs and specializing in bulk commodities (mainly coal and oil). They have not managed to develop significant activities for higher value cargoes which can best create a demand for downstream services (e.g., containers).
In this context, the report’s key recommendations include:
- Improve logistic chains. Ports are one element in a longer logistic chain, and port users tend to look at the performance of the entire logistic chain (cost, time, reliability) not only of the ports. For Latvia, this means increasing capacity of the railways; investing to allow access to larger ships; and better coordinating investments across the entire logistics chain.
- Improve investment policy. Significant investments are needed and resources are limited. Focusing resources on those investments which are critical for the ports’ competitiveness is of utmost importance. For Latvia, this requires adopting investment policies which can effectively optimize resource allocations and ensure value for money.
- Increase port revenues. Ports currently do not yield sufficient revenues to finance the required investments. Tariffs may have to be increased, and land management could be improved. In parallel, expenditure should be contained or reduced, in line with practices in competing ports. In the absence of sufficient revenues for the ports to finance their investment, any increase in taxation would require a further increase in tariffs, which may harm the ports’ competitiveness.
- Strengthen accountability. This would require strengthening the role of the boards, ensuring the evaluation of the boards and of CEO performance, and carrying out and publishing operational audits on a regular basis.
- Address concerns over transparency. Ports can improve their perception by both the public and investors by adopting practices aimed at strengthening transparency, including by providing a full response to the recent findings of the State Auditor’s Office concerning the port of Riga, carrying out and publishing external financial audits on an annual basis, and implementing an positive disclosure policy.
"The World Bank was pleased to work on the Latvia ports sector review,” said Juan Gaviria, World Bank Transport Sector Manager for Europe and Central Asia. “Over the last period, Latvian ports have managed to secure some key long-term commitments of large shippers in coal, oil, and fertilizers. Yet, they operate in a very difficult competitive environment, and further efforts will be needed to maintain and improve their competitiveness. There is no silver bullet to that effect, but the ports could improve their positioning and attractiveness by further strengthening governance and investment policies, which is what world class operators now expect.”