Investments in International Transit Transport Infrastructure and Economic Development in Latvia

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1 Investments in International Transit Transport Infrastructure and Economic Development in Latvia Aleksis Orlovs Doctoral student Aldis Bulis Doctoral student Girts Braslins Doctoral student University of Latvia (Riga, Latvia)

2 Research design Objectives: to assess the contribution of investments in international transit transport (ITT) infrastructure projects to Latvian economy. Tasks: analyse the theoretical concepts and use a case study of terminal in Riga port for assessment. Methods: systematic, logical and comparative analysis of scientific literature, analysis of statistical data and expert method. 2

3 ITT improvements and economic development There are three analytical approaches for the assessment of the nature and magnitude of the contribution that transport sector makes to the economy: microeconomic approach, macroeconomic modelling and approach on the broader economic consequences of transport investments on economic processes. In the end of the 20th century and in the beginning of 21st century T.R.Lakshmanan D.A.Aschauer, P.Mackie, J.Preston, D. Bazaras, D.Banister, Y.Berechman and other researchers have studied economic consequences of transport infrastructure and transport infrastructure investments on economic development. Despite the link between international transit transport and economic development have been not sufficiently studied. 3

4 Economic effects of ITT Factors influenced by transit transport Positive Negative Taxes for the transit New workplaces Ecological problems Economical change of state Road safety problems Increasing of income of residents Psychological discomfort Factors influenced by transit transport (modified model, Adopted from: Bazaras and Palšaitis, 2003) 4

5 Transit services export component in Latvia (authors construction) Sea Transport Rail Transport Pipe transport Transit services export component Warehouse, Logistics and Forwarding Air Transport Road Transport 5

6 Investment in ITT project and economic development in Latvia Both the public and the private sector invest in development and modernization of transport infrastructure Experts survey conducted by authors shows that currently, there are 3 large investment projects in international transit infrastructure development in Latvia under discussion: Rail Baltica development project (1,27 blneur) High speed railway Riga-Moscow development (2 bln EUR) Riga Freeport development projects (1,1 bln EUR) and various smaller potential investments with not definite time line and budgets: Ventspils Freeport development projects (Multifunctional terminal, New industrial projects development, Container and Ro/Ro business) Port of Liepaja and SEZ development projects (Harbour deepening to 12m, cleaning of the canal Karaosta, New Ro/Ro lines, New industrial projects) 6

7 Krievu Island project case study As Krievu Island project at Riga Freeport is the largest one, which is in realisation phase, then authors choose it for conduct the case study to assess the contribution of investments in ITT infrastructure projects to Latvian economy Riga Freeport (RFP) is currently one of the leading ports on the Baltic Sea with cargo handling capacity of 45 mln tons The first phase of Krievu Island project is jointly financed by the Riga Freeport and the European Union in total 149 million EUR, private investments will conclude 120 million EUR. After the realisation of project cargo handling capacity million tons per year. 7

8 Krievu sala project positive and negative effects Negative Possible traffic congestions on the left bank od river Daugava Air pollution on the left bank od river Daugava Positive Latvian GDP increase for 1% (with comparison to the 2010 GDP volume) New workplaces created: Construction stage 2000 employees, Operational stage 500 employees New supply roads and railways constructed Public supply roads reconstructed Water supply, sewerage and telecommunications networks established RFP income increase due to the additional ships incoming New warehouse services and logistics companies will appear New conveyer type technologies for Coal cargoes handling implemented Decrease of loading ships (Panamax) from 3-4 days to 1-2 days Minimisation of the impact of air pollution, noise (by handling Coal cargoes) in the Centre of the Riga city Decrease in traffic congestions on the right bank of river Daugava Existing Andrejostas port area will be released for future urban development and Riga inhabitants will get access to the river The Riga Freeport will maintain the competitiveness of the Baltic Sea Region Development of the island territory will allow Freeport expand infrastructure and activities in the future. 8

9 Conclusions 1. Currently, there are 3 large international transit infrastructure development projects in Latvia: Rail Baltica project, High speed railway Riga-Moscow and Riga Freeport development projects. 2. Krievu Island project at Riga Freeport is the largest one at Riga Freeport, which is in realisation phase. The Krievu Island project will bring additionally from EUR to EUR to Latvian economy or increase of GDP for 1 %. New workplaces will be created: in construction stage up to 2000 employees and in operational stage up to 500 employees, as well as new infrastructure and roads will be developed. 3. With conveyor type coal loading technology implementation, the Riga Freeport will maintain the competitiveness in the Baltic Sea region. New technology will allow faster processing of coal cargoes and Krievu Island proximity to the bank of river Daugava will allow servicing larger ships. 9

10 Thank you for attention! 10