Between east and west

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A highly-educated yet inexpensive work force is among the Baltic countries’ advantages in international trade. Due to their home markets' recession, Estonian, Latvian and Lithuanian companies begun seeking new markets for their products, including in Asia and Far East.

In 2006, the three small Baltic states were still booming. The economies of Estonia and Latvia were growing by more than 11 percent annually, while Lithuania boasted growth of nearly eight percent. However, the economic downturn spurred by the international financial crisis hit them hard.

“In 2009 and still in 2010 all three of the Baltic countries were in deep recession and many companies went bankrupt especially in Latvia. Estonia was in the best position of the three, but Latvia in particular might take years to recover to its previous level,” says Maria Petrushenko, sales director of Sky Partners.

Sky Partners is responsible for Finnair Cargo sales in Estonia, Latvia and Lithuania. The economic downturn meant a lot of work for the sales team.

“In 2009 and 2010 we had to fight for every shipment,” says Svetlana Boltrusevica, sales director at the company’s Riga office. “In order to maintain our position, we had to cut our prices by nearly half, because our competitors did. By now things are getting a bit easier and more stable.”

Manufacturing industry is booming

International trade plays a crucial role in the Baltic countries’ economies. These nations’ combination of a well-educated population and low workforce costs has spurred manufacturing industries in the Baltics.

For Estonia, electronics contract manufacturing is an important source of income. Along with electronics and telecoms equipment and components, Estonia exports textile and food products.

Latvia’s exports also include electronics as well as pharmaceutical products, laboratory goods, spare parts, hand-made cosmetics products and biological substances. Other key exports include textiles, particularly underwear.

“Because of the economic crisis, Latvia’s food and cosmetics industries, for instance, began to look for new markets as domestic purchasing power declined. There has been demand for handmade goods in Japan, Asian markets, North and South America, for example,” says Boltrusevica.

The Baltics also import raw materials for their manufacturing industries.
 

“The Baltic nations develop trade ties with China and Japan in particular. In Estonia, we have a lot of electronics production, which imports components and raw materials from China. In its turn Estonia exports plenty of electronics products to China as well as to USA,” Petrushenko points out.

Meanwhile the biggest of the Baltic republics, Lithuania, has emerged as a significant centre of biotech and laser technology, which is exported around the world. Lithuania also exports textile and garments, chemical products, auto industry components and furniture.

Confidence in Finnair Cargo

There are long traditions in the Helsinki-Tallinn flight route, as Finnair’s predecessor Aero Oy began flying to the Estonian capital back in 1924. Nowadays there are six flights every weekday. With a flight time of just 20 minutes, the route offers Estonian manufacturers quick access to all the most important markets.

“Air transport is ideal for Estonia’s key exports, telecoms and electronics products, because these items must reach their destinations quickly,” Petrushenko says.

The flight time from Riga to Helsinki is also less than an hour, so freight loaded onto the morning departure from Latvia can be put onto connecting flights the same day.

“Delivery by road from the Baltics to Central Europe takes 2–3 days. Our delivery times are two days faster, as deliveries to anywhere in Europe can usually be carried out on the same day,” Boltrusevica says. Despite the fact that cargo volumes from Baltics have slumped during the past few years Finnair Cargo wide network and new freighter options have given the possibility to experience some increase in volumes.

“Thanks to Finnair’s excellent network, we are able to offer our customers alternative routes if no space is available on a direct flight. For instance, freight can be carried to Tokyo via Nagoya, so we can always offer our clients better connections and quicker deliveries,” Petrushenko says. Finnair is offering plenty of freighter capacity to the very popular and demanded destinations such as Seoul, Hong Kong, New York and Shanghai which has positively influenced on the volumes/tonnage figures carried from the Baltics. This new service has given an excellent possibility to transfer dense and oversized cargo from Baltics within very reasonable time.

For delivering larger loads, there is also a daily road feeder service from all the Baltic countries. From Tallinn, the trip by road and ferry to Finnair’s Helsinki freight terminal takes just 4–5 hours.

“With these dedicated trucks, we and Finnair Cargo are able to offer an excellent solution for customers whose products need a certain temperature during transport and storage, for instance,” Boltrusevica notes.

She says that Finnair Cargo’s level of service, reliability and flexible pricing are all advantages that are valued by customers in the Baltic countries.

“Years 2009 and 2010 were extremely challenging due to the economic situation and very tough competition in the region,” says Petrushenko. “Still, we managed to keep Finnair in the market. This year seems to be much more stable. We are experiencing also a growth in our volumes and are very much glad that we can offer our customers several freighter options from Helsinki. ”

A slow recovery begins

The three Baltic countries have a total population of nearly seven million, almost half of whom live in Lithuania. Since regaining their independence in 1991, the countries have undergone massive structural reforms amid stunning levels of economic growth. During the strongest years of this past decade, the countries’ GDP grew by more than 10 percent annually.

However, that growth came to an abrupt halt with the recession triggered by the international financial crisis of 2008-2009. The sharpest plunge came in Latvia, where growth had largely been based on domestic consumption. Latvia’s unemployment rate is currently higher than 13%.

Since their rapid decline, the Baltic economies have again begun to recover. Estonia’s Finance Ministry predicts GDP growth of 3.9 percent in 2011. Lithuania and Latvia also expect economic growth (3,3% and 2,9% accordingly).

Technologically-advanced Estonia is considered one of the world’s freest economies. Among other factors, the country has very low taxation by European standards. Unlike many EU countries, Estonia has also managed to keep its public-sector debt under control.

All three Baltic countries are members of both the WTO and the EU. Estonia adopted the euro as its currency at the beginning of 2011. Latvia and Lithuania are aiming to do so in year 2014.

Finnair flies between Tallinn and Helsinki six times every weekday with an ATR-72. The plane's freight capacity is about 3m3/500 kg. There are 2–3 flights daily to Vilnius and Riga with Embraer 170/190 planes (maximum freight capacity of 1000–1500 kg). This summer season there is an additional daytime flight between Helsinki and Riga that operates five times a week. For bigger shipments there is also daily road feeder service (RFS) to Finnair Cargo’s Helsinki terminal.
 

Text by Outi Airaksinen
Photo by Imagebank
 

Published August 17, 2011

Category: Collaboration, Market updates

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