Introductory remarks by zemeunvalsts.lv

On the day when forest sector representatives held their protest outside the Cabinet of Ministers, an interview was published with Christopher Robinson, the Ambassador Extraordinary and Plenipotentiary of the USA to Latvia. What they said — “Latvia should think about the economy as a matter of national security” — ought to be recorded and played before every sitting of the Saeima, the ministries, local governments, departments, committees and commissions, at any level, whether they take place on Brīvības iela, on Jēkaba iela or anywhere else in Latvia. Before a fair number of decisions are taken, we have seen decision-makers “glance over their shoulder” — at what ... (the European Commission, cooperation partners, allies, the rest of Europe, and so on) will say. The ally has spoken: our security also lies in the economy and in professionally weighed, considered decisions that are far-sighted and well-founded. In recent years, external circumstances (C19, the war not far away) have more than once forced us to realise what has been left undone, unfinished, short-sighted. Latvia's security rests on decisive and sensible people and on a strong economy. Undermining it, whether unwittingly or deliberately, while hiding behind the right phrases and slogans, is not acceptable today or tomorrow. So it must be!

The green reform will cause losses running to tens of billions of euros

Despite the considerable increase in the total forest area, Latvia has lately shown a pronounced tendency to expand rapidly those forest areas in which forestry activity is prohibited. In 2021, forestry activity was fully prohibited across forest areas of 107.9 thousand hectares, while in 2022 the figure was already 143.1* thousand hectares.

On 5 March this year, Riga saw the second largest protests since the teachers' strike march of 24 April 2023. Latvia's foresters protested against the government's plans to bar economic activity across hundreds of thousands of hectares of forest, and moreover these bans are envisaged without any planned compensation for forest owners and for those employed in the sector.

At the end of March, only a few media outlets reported, in rather muted tones, the views of Uldis Biķis, chairman of the supervisory board of AS “Latvijas Finieris”, one of Latvia's most influential exporting companies, on the efforts to use the instruments at the state's disposal to destroy forestry and the timber industry in Latvia, both as economic activities and as export sectors: “Most likely, the legislature, the judiciary and the executive will this year adopt decisions that, without adequate compensation for landowners, will in essence nationalise large areas of private forest, which in turn will sharply reduce the availability of wood resources for the manufacture of export products and will drive many forestry and woodworking companies in rural Latvia into bankruptcy.”

U. Biķis draws attention to the fact that “one of the Green Deal policy documents — the European Union Biodiversity Strategy — sets the objective of allocating 10% of member states' land territory to strict nature protection by 2030, halting any kind of economic activity in these areas. In a further 11–30% of the territory, specific environmental aspects must be ‘brought into' economic activity, which will substantially restrict it”.

It follows from the above that “in Latvia's case, up to 250,000 ha of mature forest that has until now been used commercially is to be allocated to nature protection very rapidly”. If such plans are realised, “Latvijas Finieris” is considering the possibility of closing one of its factories, most likely the production plant in Riga.

In 1929, forests covered 25.2% of Latvia's territory. At present, forests cover 54.7% of Latvia's land. Over the course of a century we have doubled our capacity to supply the planet with oxygen and to increase the absorption of carbon dioxide.

Source: CSB, arithmetic difference between the numerical values of CSB data

According to official statistics from the Soviet period, in 1950 forests occupied 1,964 thousand hectares, and in 1988 — 2,648 thousand hectares. Forest areas gradually increased, reaching 2,956 thousand hectares in 2008 and 3,232 thousand hectares in 2009. By 2023, the forest area in Latvia was already 3,305 thousand hectares.

An important question is how forest areas have changed in Latvia's municipalities in recent years. According to data compiled by the Central Statistical Bureau (CSB), between 2019 and 2022 forest cover (forest area as a percentage of the municipality's total land area) fell in only two municipalities — Ķekava and Varakļāni — while in all the others it remained unchanged or increased.

Forest cover declined in municipalities that account for 1.1% of the land area of all Latvia's municipalities. The municipalities in which forest cover remained unchanged or increased account for 98.9% of the land area of all the country's municipalities. Forest areas in Latvia are growing. In the municipalities of Alūksne, Cēsis, Krāslava, Ludza and Olaine, forest areas grew by two percentage points between 2019 and 2022, while in the municipalities of Aizkraukle, Augšdaugava, Balvi, Dienvidkurzeme, Kuldīga, Limbaži, Mārupe, Ogre, Preiļi, Rēzekne, Salaspils, Saulkrasti, Sigulda, Smiltene, Talsi, Valka, Valmiera and Ventspils they grew by one percentage point. In the remaining municipalities the forest area stayed the same.

The forest sector is very important to Latvia's economy as a whole. In 2022, total exports from the forest sector reached 4.2 billion euros. Around 20 thousand people are employed in logging, and around 30 thousand in the timber and furniture industries. Moreover, given the sector's need for transport maintenance and other services, its cumulative impact on other sectors amounts to roughly 15% of the total value the sector creates (GDP). The forest sector's impact on Latvia's municipalities nevertheless varies, largely determined by how much forest each municipality has. In the municipalities of Ventspils, Ropaži, Valka, Alūksne and Olaine, forests cover more than 60% of the land area. Forests also cover the greater part of the area of the municipalities of Saulkrasti, Talsi, Aizkraukle, Ķekava, Cēsis, Kuldīga, Ādaži, Gulbene, Limbaži, Smiltene, Ogre, Madona, Sigulda and Valmiera. In Varakļāni municipality, by contrast, forests cover only 22% of the territory. Forests cover less than a third of the total area of the municipalities of Līvāni, Preiļi, Dobele and Jelgava.

Let us assess the impact of restrictions on the use of forest resources on the sector as a whole and on the entire Latvian economy.

As is known from calculations made by “Dienas Bizness”, in 2022, at constant 2023 prices, the average person employed in manufacturing generated added value of 61.6 thousand euros over the year. Assuming that the average employee in the forest sector generates GDP corresponding to the Latvian average for a person employed in manufacturing, it is possible to calculate the losses caused by a reduction in the availability of forest resources.

If the volume of available forest resources over the next 30 years is 10% lower than in 2023, then over those 30 years the total GDP generated by logging will be 3.7–6.2 billion euros lower (depending on average economic growth), and Latvia's total GDP will be 9.8–16.4 billion euros lower than if the volume of available forest resources were kept at its current level.

If that volume is 30% lower, then over the next 30 years the total GDP generated by logging will be 11.1–18.6 billion euros lower (depending on average economic growth), and Latvia's total GDP will be 28.3–49.3 billion euros lower than if the volume of available forest resources were kept at its current level.

And if that volume is 50% lower, then over the next 30 years the total GDP generated by logging will be 18.4–31 billion euros lower (depending on average economic growth), and Latvia's total GDP will be 48.9–82.2 billion euros lower than if the volume of available forest resources were kept at its current level.

The forest sector has been and remains a significant generator of export production, and over 30 years it has moreover changed fundamentally: from being primarily a producer and supplier of raw materials to other countries, it has become a sector that processes local resources into products with far higher added value — and correspondingly a much higher price when sold on export markets, with the money earned growing the national economy.

The sector is not only a significant provider of jobs throughout the country, but also creates a cumulative effect, providing jobs and earning opportunities in related fields as well, which in turn further fuels the growth of the economy as a whole. Whether Latvia chooses the path of creating wealth or of diminishing it depends largely on the choices made by politicians.

If the government prohibits the economic use of forests, it must also compensate for the loss of jobs in municipalities that specialise in forestry, which will affect the people living there, businesses and local governments alike. Around 20 thousand people are employed in logging, and around 30 thousand in the timber and furniture industries. If the volume of available resources (work) falls by 10%, five thousand employees will be left without work — a step that will affect 5,000 families across Latvia. If the volume of available resources (work) falls by 50%, 25 thousand employees will be left without work. Together with family members and dependants, such a step will affect almost 100,000 people in Latvia.

The forest sector is an important branch of Latvia's economy, paying 645 million euros into the state budget and in wages every year, while people also obtain non-wood values (berries, mushrooms, hunting and so on) worth around 90 million euros. The total growing stock accumulated in the forests is 682 million m³. The annual growth of wood in the forests is around 25 million m³, including bark and treetops. Each year some 12 million m³ of wood is harvested in Latvia's forests. Latvia has around 135 thousand private forest owners who are natural persons, most of whom (~80% of the total number of properties) own small forest holdings (<5 to 10 ha).
Source: Latvian Forest Owners Association

Balanced social, environmental and economic policy dimensions are the foundation of Latvia's sustainable development. Latvia's resources are limited, so every investment must be responsible and considered, funding innovation-oriented public services so that future generations live in a contemporary, prosperous and high-quality living environment. The aim of economic policy is to achieve sustainable growth in gross domestic product by increasing productivity, investment, exports and employment. Competitiveness is founded on scientific achievement, modern skills and the ability to make use of the opportunities offered by technology, on the ambition and entrepreneurial spirit of Latvia's people, supported by high-quality and accessible public services and a legally secure investment environment.
Source: Declaration on the intended activities of the Cabinet of Ministers led by Evika Siliņa (15 September 2023)

The article was first published on 22 March 2024 in the newspaper “Diena”
* After the article was published, the State Forest Service issued a correction to the data:
https://www.vmd.gov.lv/lv/jaunums/veiktas-izmainas-datos-inventarizeta-meza-platiba-ar-mezsaimnieciskas-darbibas-aprobezojumiem-tukst-ha-par-2022gadu