For the last edition of the port pro of the month of 2021, ESPO sits with Mr Ansis Zeltins, CEO of Freeport of Riga. He explains how he got into the maritime industry, the projects and investments for the next years in the port, and shares his views on the revision of the EU’s TEN-T policy, the port’s relationship with the city of Riga, and much more.
Can you briefly tell us about the Freeport of Riga? What are its main characteristics and challenges?
The Baltic Sea is one of the busiest maritime places, with more than 200 seaports in the region, it is very diverse by its nature, serving over 300k ships annually and handling over 900 million tonnes of different cargo type and yet it has a very scarce and vulnerable sea environment. All these aspects makes us a nearly perfect playing ground to develop a port of the future. During the past decade, the Port of Riga, as well as other ports in the Baltic Region, has witnessed significant changes. Among other things, rising port competition, geopolitics, etc., these factors have become compelling reasons for us to twist our mindset and seek new ways to adapt to the new realities, stabilise port performance and, let’s be optimistic, return to growth!
“It is not the strongest of the species that survives, nor the most intelligent. It is the one most adaptable to change” – Darwin was absolutely right, change is the key! I must admit this is quite an accurate saying about what we see happening today at the Freeport of Riga. Therefore, the first attribute for the Freeport of Riga is its adaptability to the changing market conditions.
The second characteristic is its multifunctionality of operations that I see as a key to stability. Historically, the Freeport of Riga has been providing vast array of services for all cargo segments. On top of multifunctionality, the port provides a so-called Free zone status for investors, which is a substantial package of tax relief to those, who decide to invest in the port’s territory. According to the new vision of the Freeport of Riga, a stronger emphasis is to be placed on more efficient use of land and development of free territories within the port. We focus on new investment projects on the Baltic and North European scale with preferred focus in areas such as logistics, warehousing, production and value-adding services. Yet, even more desired are investment projects that can bring diverse industrial activities to the port’s territory, e.g. production, assembly, etc. because in such way, we intend to shape a stronger core for new cargo flows in the future.
What is your long-term vision for the Freeport of Riga? What are the main investment projects for the coming years?
To put it concisely, the new vision for the Freeport of Riga is to become the central port of Northern Europe – a port for business, a port for the city, and a port for people. We will work to become a hub port and distribution centre for various general cargoes, with developed logistics services on the Baltic and North European scale.
The port shall focus on intensifying its container and RoRo services to/from Riga and, therefore, we seek new operators to whom, we can offer financial incentives, e.g. discounts on port fees. Another shift from our previous strategy is dedication to local export cargoes and building within the port a cluster for the Latvian timber and agri-bulk segments. That means not just handling and storage, but also developing services to such cargoes that can create more value for the customer and raise the prices of the product in the market.
Finally, we also plan to step our foot more strongly in the segment of passenger traffic and become a significant player in the regular RoPax traffic, as well as in the cruise segment. Personally, I am quite enthusiastic about this because I believe that Riga, as a city with more than 800 years of history, has a huge potential to capitalise on the growing cruise tourism worldwide, in Europe and also in the Baltic.
In the pre-COVID-19 times, it has been estimated that, globally, the cruise industry, with an average annual growth of 5%, is the top holiday-spending choice for customers with a 30 million pax market and USD 150 billion of revenues annually. In Europe, the growth is even higher – some 10% annually with a market of 13 million pax. Meanwhile, in the Baltic Sea the growth is slightly more moderate – just 9% annually with a cruise passenger market of 6 million per year. To my understanding these are quite impressive figures and if we speculate a bit about the future when we can return to normal market conditions – hopefully – there is a room for expansion also for the Port of Riga.
For that matter, we have started a project in 2021 to develop a brand-new RoPax and Cruise vessel terminal. The new facility will be just 2km further from the quays where cruise vessels are presently serviced, but, more importantly, the new terminal will be equipped with the latest technologies, like automatic mooring systems and OPS for vessels. All in all, we estimate that the new terminal will come into operation in 5 years. The project is ambitious and let’s see how we progress with implementation.
Finally, we also have quite ambitious projects of transforming the Freeport of Riga into a smart port by introducing automated access gates to terminals at the port, as well as by integrating various IT systems used by port operators and state institutions, etc. All in all, the investment portfolio of the Port Authority for the upcoming decade amounts to EUR 260-300 million, which is quite ambitious, isn’t it?
On 14 December, the Commission has published its review of the TEN-T policy. While the proposal does not change drastically the setup of the network, it aims at greening, more efficiency and resilience of the network. What are the main priorities for your port in that respect? Has the port benefitted from being part of the TEN-T core network?
Freeport of Riga has been an integral element of the North Sea-Baltic corridor of the EU TEN-T core network already for a few decades. That has allowed us to realise a number of infrastructure projects using finance from the TEN-T funding schemes. The future of sustainable port operations lies in each port’s ability to effectively implement in its DNA emission neutrality, energy efficiency and innovation. I already mentioned that in Riga, we put our bet on digitalisation of logistic corridors and that means digitalisation of not only port operations, but all transportation food chain from door to door. This is paramount if we want to be a sustainable and competitive port in the long run and we do.
European ports welcome the extension of the EU Emission Trading System (ETS) to maritime transport, in order to lower emissions by putting a price tag on emissions from shipping. However, ESPO sees under the current proposal a risk of carbon and business leakage to neighboring countries outside the scope of the ETS. How do you view the impact of this proposal for the Port of Riga?
It’s true that maritime transport has stayed out from being part of ETS and most probably it’s time for the industry to do its share in the global fight for our planet. The European Commission has put forward the Fit for 55 package which outlines a number of blocks of actions like ETS, taxation of marine fuel, alternative fuel and onshore power supply (OPS), and all these activities for sure will affect how we as ports will operate and develop in the coming future. Nevertheless, before changing the rules of the game, we should bear in mind two fundamental characteristics of our industries, in my view – shipping is global and historically only a few locally enforced regulations have turned to be effective, ports between countries and regions are competitors, where ports can rarely move but businesses can do it quite easily. Here in the Baltic Sea, besides EU ports, Russian ports are also very active and they are investing heavily in their development. That situation leaves open quite a lot of questions – how will EU ETS affect freight rates and potential shift of cargo corridors, marine fuel prices particularly for regular shipping servicing EU/non-EU as well as competitiveness of short sea shipping against road truck service. Saying that, we in Riga are actively working together with our port operators and government to make our commitment to meet EU environmental strategies, while being and staying competitive in the region at the same time.
The COVID-19 crisis is having a profound impact on the European economy and society. What has been the impact of this crisis on the Port of Riga? Do you also already see signs of recovery in the Port of Riga?
In relation to COVID-19 effects on the port performance, during the last two years, we have felt a direct and straightforward impact of the pandemic on the RoPax and cruise segments. For example, in 2021 it resulted in precise figures in 95 unreceived and unserved cruise calls, as well as more than 350 calls of the regular ferry connections. Of course, this has borne direct impact on the financial performance of the terminals as well as the Port Authority and also the tourism industry in Riga city. Yet, the influence of the pandemic on cargo segments has shown mixed and sometimes also indirect or even reverse effects. First of all, due to the slowdown in economic activity globally, the demand for industrial production resources (and energy) diminished. As a result, we see reducing amounts in the fossil energy segment like coal and oil products shipped through the Port of Riga.
The slowdown in economic activity caused less income and lower consumer spending and this always reflects on the container traffic, where we have witnessed a moderate reduction, which is also attributable to disrupted logistics chains globally, shortage of containers and their high freights, bottlenecks in hub ports, etc. On the other hand, in cargo segments like timber products, volumes in Riga have even increased because of COVID-19. Lasting lockdowns introduced new spending patterns for consumers, for example in the UK. Staying at home, people resorted to at home do-it-yourself construction activities, and as a result the demand for construction materials increased. There are also segments for which the pandemic had hardly any impact at all. Volumes of agri-bulk commodities (grain, cattle feed, byproducts, etc.) are dependent on seasonal harvests. In a good season, production is higher, resulting in more export volumes and vice versa. So, the agri-bulk segment, which is by far one of the prospective ones in our port, has progressed without any impact of the pandemic.
The Freeport of Riga enables companies to operate under a special economic zone regime. Can you briefly explain this special economic zone regime? Which companies usually opt for such a regime? What are the main benefits?
The special economic zone (SEZ) regime at the Port of Riga was introduced in 2001 as a state support means to promote the development of the port by offering existing operators and also new investors substantial tax relieves in their operations in the port territory. In essence, if an operator decides to build a new facility, acquire technical equipment, etc., or if a new investor comes to the Port Authority with an initiative for a brand new terminal facility, by fulfilling a specific administrative procedure – concluding an investment agreement, operators are entitled to apply tax reductions in their commercial operations.
The SEZ regime is effective at the Port of Riga today and it will be effective until 2035, which implies that all potential investors looking for a decent land lot at the port for their projects can still count on these incentives, provided they conclude investment agreements with the Port Authority until 2035. Tax reliefs are applied as discount rates on taxes that are in effect in Latvia (corporate income, real estate, excise, VAT), and discounts are applied every taxation year until their accumulated amount reaches 35-55% of direct investment amount in the fixed assets of the company. Put simply, after the completion of a development project, an investor can recover half of total investment cost in the project in the subsequent years of operations of the facility. Thus, the SEZ regime is a very advantageous measure and a strategic advantage for any operator who decides to invest and operate within the port because, obviously, the return on investment and financial yield of a project is higher than without such tax relieves.
The Freeport of Riga is part of ESPO’s EcoPorts network. Can you briefly explain the Freeport of Riga’s environmental policies?
The Freeport of Riga is implementing a green future strategy through decoupling our growth from resources, constantly minimising our carbon footprint, and mitigating ecological risks. Being one of the country’s most significant cargo hubs, we actively contribute to EU and national incentives towards sustainable development and climate neutrality. We are working united with municipal and state representatives to preserve nature’s capital in our domain and to develop urban waterfronts.
On 9 November, Port of Gdańsk Authority won the ESPO Award 2021 in recognition of its role in the recovery of the city and the local community. Does the Freeport of Riga have policies and projects to reinforce the relationship with the local community? What is the added value of the port to the local community and wider region?
One of the strengths of a city is having a developed port, and the strength for the port is to have a support from the city. The city of Riga and its port have more than 800 years together of good times and difficult as well. We joke that Freeport of Riga is one year older than the city of Riga. If we look back, more than 820 years ago, the first traders arrived here on their sailing ships and established a port, which with time, became our capital – the city of Riga. Freeport of Riga and the city have grown together through good and bad times. Nowadays, Riga’s port and the city have reached a new stage of integrated relationships. We are unlocking the full potential of regional tourism, co-development community, and design-led city planning. We are persistently changing the philosophy of our work – the Freeport of Riga must become more open and interactive towards society and inclusive for society needs; it must serve the interests of both the city and the state in a wider sense and at the same time continue the mission it has been fulfilling for centuries – to support the economic growth of the city and the country (smartly).
How did you get into maritime transport? How did your career path lead to this position?
Growing up as a kid and spending my childhood summers in a small town called Roja, which is located right next to the Baltic Sea, it never came to my mind that one day I would be working onboard of ships or in any other way be related to the maritime industry. But in school, I always have liked the geography lessons, and I was always curious about traveling and exploring the world. Growing up in the nineties in the post-soviet era, it was difficult to travel anywhere outside Latvia, so in order to explore my curiosity about the world, I decided to join the Latvian Marine academy. Now, looking back, I can clearly say that it was the right decision because my professional career, ever since, one way or another, has been connected to the maritime industry. I have worked at the Latvian Maritime Administration, later became Maritime Attaché for Latvia, and was appointed Permanent Representation in Brussels dealing with maritime affairs in the EU Council during Latvia’s Presidency in 2015. So yes, becoming the CEO of Latvia’s biggest port back in 2017 was already absolutely a pragmatic decision of mine!