Andis Araks is interviewed by Māris Liopa, director of the forest and related industries portal zemeunvalsts.lv, and Pauls Rēvelis, editor of zemeunvalsts.lv.

The industrial site in Talsi where the company operates looks as though it might have been built in the 1980s.

I think we can go back a little further than that – to the 1970s. We work on the site of the former “Lauktehnika”, where “Krauzers” manages 14 hectares.

How did the company begin?

Historically we are a logging company. We started out by buying felling sites and properties and harvesting them. A little later we acquired machinery, and then opportunities arose to work with “Latvijas valsts meži” (hereinafter – LVM), hauling roundwood, which was the next stage of development; a fairly rapid one, too. In three or four years we grew from a company with two timber lorries into a company with “-teen” (10-12) timber lorries; that number has stayed the same for some time now. At the moment we are not considering plans to expand the fleet; we are thinking about improving the quality of our service, and also about attracting drivers, which is currently a considerable problem throughout Latvia.

A year ago we set up a separate unit – a training timber lorry – used solely and exclusively for training, together with an instructor, of course. The instructor is experienced, he has worked at “Krauzers” since the company's earliest days, and I can say he has grown up alongside us. Before he started working with us, he spent a short spell (still in the Soviet years) teaching at the nearby Laidze technical college.

What does “Krauzers” produce?

The product types vary: packaging material for pallets and various kinds of boxes, a garden segment and outdoor finishing materials, for example decking board blanks. We also process and export firewood.

Taking a turn around the former “Lauktehnika” site, you can see neatly stacked firewood...

It was prepared in the spring so that it can dry naturally. We do have storage premises, but, as always, they are too small for this purpose. The market is quiet in summer, so we decided to dry it in the open air.

So nobody repairs the sledge in summer or lays in firewood for the winter.

I have to say that this summer was the first in a long while when firewood production had to be halted, because exports stopped altogether. In previous years the export market, although subdued, at least “moved” a little, in small volumes. This summer we used the standstill in the market for holidays – we did not work. After the break we carried on working for stock, and in August firewood sales resumed.

How did the company name “Krauzers” come about?

It was a coincidence. In 2003, when we decided to buy new logging machinery and, together with a colleague and business partner, decided to set up our own company, it was more advantageous to buy an existing one. We bought the name and the company without changing anything. And so we have continued. Krauzers is a slightly embellished version of the former owner's surname.

So this year the company turns 21.

That's right!

What is the situation with resources, work and opportunities in Talsi district and northern Kurzeme?

Every region of Latvia has its own particularities. Four things matter: the availability of labour, the availability of infrastructure, the availability of resources and the distance to a port. For instance, the availability of resources and their price in Gulbene will be considerably lower, but the distance to a port will be greater. Here in Kurzeme, resources and labour are more expensive, while the journey to a port is cheaper, because it is shorter.

In northern Kurzeme it seems most of the timber resources are managed by LVM.

Yes, but not entirely, because the region has a large amount of good-quality forest cover and very good infrastructure. If we compare Latvia's different regions again, the Vidzeme upland, for example, is difficult terrain because of the relief, in far Vidzeme around Alūksne road conditions are problematic, while in Latgale there are problems with timber quality. I would say that here in Kurzeme the situation is the best and at the same time the most expensive.

Does “Krauzers” own forest properties?

Small ones.

Deliberately small?

They used to be larger, but when we assessed the company's development strategy and its possible variants, we decided to sell the greater part of our forest properties and invest the proceeds in the company's development and production, which we have duly done in under four years.

About colleagues in the industry who are increasing their forest holdings I can say: “Good for them, if it works out.” We were, so to speak, a logging company that had already put one foot into production. We wanted to take a very wide next step. Of course, financing opportunities in Latvia are not such that businesses can afford large, wide steps in development, which is why, where forest properties were concerned, we came down in favour of development, so as to become serious players in the production sector within a few years. It was a decision in favour of rapid growth, and it coincided with good opportunities and a good offer.

Employees and staff turnover at the company.

The bigger the team grows and the more the fleet expands, the more regular staff turnover becomes. When we had 5-6 timber lorries, the people who came to work for us also stayed. Once the company owned 10 vehicles and the number of drivers grew, so did the turnover. It has to be remembered that this work is not easy; for each vehicle we have 3-4 drivers, and we provide them with the most modern and best machines available. I dare say it happens that someone comes along without having weighed up what they can do, gives it a try and realises that it isn't what they wanted.

As for the rest of the fleet, we have one harvester and one forwarder, both employed 100% in our own logging operations. If we compare regions, in Kurzeme there is no problem at all in hiring a logging contractor, whereas in Zemgale and Vidzeme that is already a problem, which is why, when we go there, we work with our own machinery.

It appears that, like other Kurzeme companies, you work all over Latvia except Latgale.

Precisely put. If one of our regular clients has a property in Latgale, we drive out and do the job. We don't look for new clients in that region, because distance is an important factor. I would note that we cannot compare today with the situation 10 years ago. I know that Latgale has quite strong small and medium-sized companies that cope excellently with forest work, and they have taken their share of the market.

A great plus of the people of Latgale is their determination and willingness to take a chance. A Kurzeme man might not get a comparable job done as quickly or on that scale. Over time I have concluded that there are certain character traits that differ between Latvia's regions.

On the ports mentioned earlier – Talsi is midway between Ventspils and Riga; do you also use any of the small ports on the gulf?

Yes, of course! We work with the port of Mērsrags, and we have signed a cooperation agreement on cargo handling.

Roja is not far away either.

In Roja there is one businessman who has bought a berth for transhipment, and in practice he alone loads the port to the volume it is able to handle.

Several years ago, when the small ports of the Gulf of Riga were discussed, there was debate about what to do next. From our conversation it seems that work is going on in the ports.

In Mērsrags everything is happening, exactly so. I would add that recently, at the beginning of August, the Kurzeme council of the Latvian Chamber of Commerce and Industry (hereinafter – LTRK) held a meeting on the topic “Opportunities, development and investment for Latvia's small ports”. In a long afternoon's discussion we reached the conclusion that the management structure of the small ports needs to change, because in the present situation development is not possible.

What exactly would be needed?

For the state and the municipalities to give up managing the small ports. A representative of the State Audit Office also took part in that meeting and confirmed that none of the development routes would encourage or permit investment for the benefit of a particular business...

...which in the auditors' view would count as state or municipal action or investment serving private interests.

Representatives from all the small ports took part in the discussion – Salacgrīva, Skulte, Pāvilosta, Mērsrags – however different they may be. And everyone was of one mind that the management model must change, with the ports being handed over to private hands. A similar model works successfully in Scandinavia. In Latvia, though, there is a bad example, or more precisely bad memories – the 1990s. As soon as a proposal comes up about privatisation or handing something over to private hands, those present become evasive and are unwilling to take the discussion any further. Unfortunately, in the case of the small ports there is no other option for development. The conversations will have to continue.

Is there any hope that such changes will happen?

Until now it has not been talked about loudly enough, in the way the port representatives themselves did at that meeting. LTRK is ready to take part, to support and to act jointly.

LTRK is a fairly active organisation, although at times it seems to have become a little like a ministry.

Since I sit on the LTRK council myself, I do sometimes feel that. I think it is because LTRK represents a great many different interests. For example, when you go to one of the ministries to make the case on several matters at once, you cannot call for the minister's resignation, because – if nothing is “moving” on one matter, there is positive progress on another. Sometimes we don't want to lose one gain when we aren't quite sure what will happen with the other. I agree that we should be more insistent and less accommodating. At the moment, together with the Employers' Confederation of Latvia, we have raised the issue of sick leave more loudly and given time for the situation to be considered.

Estonia has taken a step on tax reform, with which businesses in our neighbouring country are very unhappy, believing it will hold back the whole country's development.

Until now Estonian businesses have been in a better position than their Latvian counterparts. Our government is unofficially considering not raising labour taxes, which would be something of a victory. How things ultimately go with the promises, we shall see.

On the situation and what we have experienced so far with and around taxes, the short version is this. Businesses and the government align their positions in talks, they synchronise their actions, there is positive progress. Then at some point the door closes and the talks end. Several months go by, almost half a year, and the government comes out with entirely different proposals that have nothing to do with what was discussed before. All the work and time we businesses invested seems thrown to the wind. There were talks, but as a result nothing has been achieved.

Who would be responsible for that?

I think we should look in the direction of the civil service. From time to time we have very sensible and logical ministers. In this government the prime minister is one of the most logical people to have been in government of late. But as soon as the activity and the implementation pass into the hands of officials, serious problems begin.

On the subject of public administration, I also see a certain problem in the sheer number of reforms – there have been more than a few, and the people who work in the public sector do not feel psychologically comfortable. For example, a year and a half goes by and something changes again, another year and a half – it changes again. There is no stability or certainty. It is not good if, when the government changes, something changes at the very foundations. In a private company we cannot afford to keep “shaking up and rattling” our employees, who are of great value to us.

Do the people working at “Krauzers” mostly come from Talsi district and the immediate surroundings?

We have around 250 employees.

What about young specialists?

I would put it this way – at management level we have practically no staff turnover, which is why the company needs young specialists when we are developing a new line of business, a new type of activity. Professionals are not easy to come by; most often we have had to retrain a specialist we had already found within the company, so to speak with our own hands. Very rarely do we find the professionals we need outside the company. We have logistics specialists who learned the job when they started working here. The clearest example is a colleague, a sawn timber export specialist, who joined the company as a trainee and is still with us.

Have you had to take part in clearing up after the storm?

We have not been involved. As I mentioned earlier, we work more locally, and the storm did not affect Kurzeme; its area of action began at Jūrmala. We have received an invitation from Zemgale to assess the possibilities of helping to put properties in order. Looking more broadly, the Latvian Forest Industry Federation (hereinafter – LKF) has been approached by Riga municipality to discuss how the consequences of storms like this could be dealt with more successfully in future, involving companies from the industry. In my view, that would be a very good opportunity to develop the idea in other municipalities too.

How, and does, the company feel the events and changes at Talsi district council?

For any company operating within an administrative territory, what happens outside the company matters a great deal, because these developments are connected both with our work and with our employees, and with the corresponding provision – whether there is a kindergarten, whether there is a school, whether there are hobby activities for free time, and so on. It is the same with employees. If processes (or upheavals) occur of the kind we have seen and lived through in Talsi district in recent years, our employees cannot get any positive emotions here in the district. A person can go to Ventspils or Kuldīga for something positive – there they will find it. In Talsi it is rather difficult – yes, events do take place, there is a town festival, but... Talsi has a music school but no swimming pool, so you have to go to the neighbours; if the whole family wants to relax, again we drive to the neighbours, or to Jūrmala. That is not good. The town has no decent play area where children can spend their time...

In cooperation with the Talsi business club, a small children's playground is being built, which strikes us as suitable and fit for purpose, but there ought to be one like it in the courtyard of every four- or five-storey block.

Where does the problem lie? Did the regional reform “throw together” districts that are incapable of living side by side, or is it something else?

In my view, the regional reform has not achieved its aim. Today the fruits of the reform are coming to light, because politically there was no mandate to work towards a defined goal. There are no clear tasks, but politicians have done everything to be actively involved in various projects during their term of office, thinking about their chances of being re-elected while completely forgetting the higher aims of the reform.

One can conclude that the problems are similar in many places.

If we look at it territorially, Talsi district has returned to the boundaries of the old Talsi region. The question is what the aim was in doing so. Many people use the word “save”. In the years since the regional reform nothing has been done to save anything; the number of public sector employees has grown, for instance, and salaries have risen as well. What exactly has been saved?

The situation is reminiscent of putting out a fire once everything has already got seriously hot – the municipality has several levels of administration which, used properly, make it possible to manage and forecast processes day to day, in the medium term and in the long term. That opportunity has not been used.

Coming into the company's office, one can see photographs of the Talsi floorball team.

The origins of those photographs, if I can put it that way, go back to the beginnings of floorball in Talsi. The local team was then competing very successfully in the Latvian premier league and carried on as it had begun. At that time the team was made up of my contemporaries, and there was a very energetic management team that approached local businesses. That is how we became involved. My son had not yet started walking at the time. When we went to watch the matches, he slept in his pram. As he grew up he too chose floorball and still plays; at the moment, though, he is studying abroad. The Talsi floorball club brings young people together, starting from kindergarten age, and still plays in the premier league, where it competes for the top places. We continue to support it.

How are things going for LKF?

Given that 2023 was a very hard year for the industry and for Latvia's economy as a whole, and that this year is... only slightly better, though not in a way that is clear to everyone, the mood is not overly optimistic. Everyone is trying to fight their own corner; there are jointly started matters that are continuing. There are no rapid breakthroughs, there are the existing problems and situations that the federation is working on.

The industry always has to fight for something.

The new conditions and the new environmental requirements have taken a great deal of time and energy in recent years. We are working actively in that direction. The worst thing, in my view, is that colleagues involved in these processes literally run out of steam and disappear, and worse still – people in the industry who are even slightly removed from the active flow of information often think that nothing is happening and nothing is being done. Then, when something suddenly does happen, a swift, ill-considered conclusion follows: “Hang on, you haven't done anything at all!” That does make your blood boil, especially for those who deal with it day in, day out.

This work is extensive and consumes all sorts of resources.

If the snowball had rolled on unimpeded, as somebody had planned, I think the situation would be far worse.

Compared with Scandinavia, Latvia's forest sector has one big minus, namely that in Scandinavia it would be hard for a business to operate in this field and survive outside a larger professional organisation, because, firstly, the financial support for such an organisation in our nearby neighbours comes from the whole industry, not from a few “players”, and secondly, the availability of information is far greater, and those who receive it understand the seriousness of the situation. As I have already said, I think, and I know, that here in Latvia almost half of all companies (small and medium-sized) still do not understand the seriousness of the environmental issues that have to be dealt with and that lie ahead, or their possible impact on the industry in the future.

Thinking about the future, what might the industry look like in the years ahead?

Speaking of the next 10-15 years, Latvia must certainly become a producer country of higher added value, if we are thinking about processing products obtained from the forest. The next steps definitely have to be taken. In the primary processing of wood products we are among the leaders; it is time to move further on. To do that and to achieve it, we have to recognise that Latvia's population is shrinking, so the people we have must be educated so that they can work as supervisors in any position where we are planning to use guest workers – so that guest workers do not come in to manage our own people. Accordingly, where education is concerned, it is important that Latvia trains young people who master specific trades, who are able to work in industries important to Latvia and to manage those who come here to work. Such people (guest workers) there will be; it is finally time to take off the rose-tinted glasses! It is important that state support mechanisms for those who wilfully do not work should not swell into a great bubble, but should be controlled and agreed with businesses.

We explain to our partners, clients and buyers how very important it is to see the whole field of activity. For example, if problems begin in logging, you have to prick up your ears, because before long they can rebound on production or affect it. If you don't know the situation well enough, it can happen that you miss something important even in the small details. Of course, the ability to survive and keep working is one thing; how successfully it is done is another question. Latvia is quite small, and the world market is not overly vast either, because it often happens that we meet at some market outside Latvia and hear what others say about us and about our neighbours. That is when you draw your conclusions and get a sense of how large, or how small, the space is that we all work in.