Latvia, Azerbaijan forge closer economic ties Exploring investment opportunities

Very active political contacts between the leaders of Latvia and Azerbaijan in recent years have also had a favorable impact on bilateral economic ties. The interests of business circles of the two countries today extend far beyond mere trade exchange, and Latvian and Azerbaijani businesses are striving to realize investment initiatives attractive for capital investments. Among the priorities are the creation of joint ventures in the agricultural sector, joint projects in logistics, "green" energy, digitalization. New business trends were discussed at the Azerbaijan-Latvia Business Forum held in Baku.

This January Azerbaijan and Latvia celebrated a significant date - the 30th anniversary of the establishment of diplomatic relations. President of Azerbaijan Ilham Aliyev sent a congratulatory letter to Latvian President Edgars Rinkēvičs in connection with this significant event: " The present level of relations between Azerbaijan and Latvia, based on the traditions of friendship and mutual respect, are gratifying. Throughout the past years our bilateral ties have grown stronger and elevated to the level of strategic partnership. Our cooperation has developed dynamically. Today, there are ample opportunities for advancing cooperation between our countries and enriching it with new substance”.

Latvia, which has consistently supported the sovereignty and territorial integrity of Azerbaijan, has always played a very important and very positive role in ensuring closer cooperation between the EU and Azerbaijan. Riga has traditionally built relations with Baku as the economic leader of the South Caucasus region and the EU's most important energy partner. In turn, Baku considers Riga as the leading transportation and logistics hub in the northern region of Eastern Europe and the most important platform for the export of Azerbaijani non-oil products to Latvian and neighboring markets. It is noteworthy that Latvia and Azerbaijan also jointly participated in eight twinning projects initiated by the European Union with a total value of €9 million. All of the above has been an excellent basis for consistent expansion of economic cooperation between the two countries for many years, especially since there is a huge and still not fully realized potential for this.

It is relevant to recall here that the situation in Azerbaijani-Latvian trade began to change dramatically after the Azerbaijan Export and Investment Promotion Agency (AZPROMO) operating under the Ministry of Economy launched a trade diversification program, during which Azerbaijan's trade and wine houses were established in a number of countries. In particular, in July 2018, such a trading house started operating in Riga, eventually turning into a kind of transshipment hub for further promotion of food and other non-oil products to the neighboring Baltic countries and further to the vast European market. In particular, in recent years Azerbaijani grape wines and brandy, jams, stewed fruit and fruit juices, canned fruits and vegetables, narsharab, olive and lavender oil, tea, as well as fresh tomatoes, pomegranates, persimmons, melons and hazelnuts have been systematically exported to Latvia.

The prospect for further expansion of Azerbaijani-Latvian trade and economic cooperation is confirmed by the good start taken by the entrepreneurs of the two countries in 2022, remembered for the energy boom and overcoming the recession of the pandemic period. Mutual trade turnover in the reporting year increased by 70 per cent and reached $46 million, with a significant positive balance in favor of Azerbaijan: Azerbaijani exports increased almost three times to $28 million, with almost 98 per cent of domestic supplies to Latvia accounted for the share of non-oil products. The gained dynamics was significantly increased in the past year.

"Trade turnover between the two countries at the end of 2023 amounted to $65 million, of which Azerbaijani exports accounted for $45 million, thus ensuring trade growth of 64 per cent," Deputy Economy Minister Sahib Mammadov said during the forum. - In the first quarter of 2024 trade turnover amounted to $6 million, and we are dissatisfied with these indicators, as they do not meet the potential of the two countries: we need to make maximum efforts to expand the range of goods under import-export operations". In this regard, according to the Deputy Minister of Economy, there are ample opportunities not only for further growth of bilateral trade turnover, but also for expansion of investment cooperation, formation of joint ventures, etc.

The countries have signed 45 interstate and intergovernmental documents forming a solid bilateral legal framework, including the Declaration on Strategic Partnership, as well as Agreements on Encouragement and Reciprocal Protection of Investments and Elimination of Double Taxation. This solid legal base contributes to the intensification of business cooperation, growth of capitalization of joint projects. Thus, out of 69 Latvian companies registered in Azerbaijan as of February 2024 in such spheres as industry, transportation, trade and services, 48 of them are actively operating. Deputy Minister Sahib Mammadov also emphasized that Azerbaijan's investments in the Latvian economy from 1995 to the end of 2023 amounted to $166 million, a comparable amount of Latvian investments was also invested in the Azerbaijani economy.

Ahead of the forum in Baku, promising directions for expansion of investment cooperation and establishment of joint Azerbaijani-Latvian enterprises were outlined. "Latvia is interested in bilateral cooperation in the field of agriculture, which does not exclude the establishment of joint ventures in Azerbaijan," said Romans Naudins, advisor to the Latvian Ministry of Agriculture, during the forum. This initiative was fully supported by the Azerbaijani side: according to Deputy Minister Mammadov, 30 per cent of Latvia's territory is given over to agricultural development, and Azerbaijan is interested in this experience in the agricultural sector and other areas, as these developments could be effectively used in projects implemented in the territories of the country liberated from occupation.

According to Latvian State Secretary of Agriculture Ministry Raivis Kronbergs, the signing of the Azerbaijani-Latvian memorandum on cooperation in the field of agriculture contributes to the development of new joint endeavors on the agricultural track. "We believe that the memorandum will be signed in the fall, when the Latvian delegation will arrive in Baku to participate in the COP29 conference, but we will discuss the exact terms during the meeting at the Ministry of Agriculture," Kronbergs said.

Another promising area for cooperation is the transport sector: taking into account the new geopolitical realities, Latvia is interested in cooperation with Azerbaijan in the field of logistics and cargo transportation along international transport corridors.

"Cargo transportation from Asia to Europe faces many logistical challenges due to the changing global geopolitical situation, in this regard, the Middle Corridor, which is part of the ancient "Silk Road" and is considered the shortest trade route connecting Europe and China, acquires new importance for connecting the continents," said Deputy Minister Mammadov, who also emphasized that he expects an active partnership with Latvian companies in the logistics sector.

In general, during the business forum held the day before and the business meetings of various formats that preceded it, it was noted that Latvian companies will be given wide opportunities to participate in the restoration and reconstruction of the Karabakh region, participate in projects as "smart" cities and villages, logistics, "green" energy, etc. In turn, preferential conditions will be provided to Latvian investors who are ready to become residents of industrial parks and neighborhoods and the Alat Free Economic Zone. Not so long ago, the prospect for establishing joint production of competitive goods through which it will be possible to enter the markets of third countries, including the European market, was noted among the priorities for production endeavors.

These include biomedicine, smart energy-saving technologies, the Internet of Things (IoT), as well as other photonics and optical cable production. Another important vector for joint business is the tourism sector: the first step in this area was taken in May last year, the Latvian national airline AirBaltic resumed direct flights between Riga and Baku.

"We think that the current visit to Baku contributes to strengthening relations between the two countries. At the same time, we suggest Azerbaijani companies to develop activities in Latvia, where there are opportunities to use the European fund, and jointly manufactured products can be exported to the European Union," adviser to the Latvian Ministry of Agriculture Romans Naudins summarized the results of the forum.