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Latvijas būvniecības industrijas resursu problēmas vienotā Eiropā
[Latvian building industry resources problems in European Union]

Listed author(s):
  • Skribans, Valerijs

In the paper Latvian construction industry is comprehensively evaluated and compared with the Baltic States and the European Union. Industry resources and it costs are analyzed by group: natural resources, production of building materials, fixed assets and attraction of money capital, personnel costs. Possibilities to obtain profit while working in construction were analyzed. Basing on the analysis, suggestions for improvements in the industry activities are elaborated. Nature factor is one of the most important factors, which substantially influences on construction industry development. Nature factor (resource) costs do not decrease, because the largest part of the natural resources is nonrenewable. Comparing Latvian data with the average EU data and median, it is evident that in Latvia there are cheapest materials, which ask the minimum treatment, and are accessible in the country (sand, wood). Materials, for which industrial machines are necessary (blocks, tiles), have higher prices in Latvia than in the EU. Comparing Latvian data with the other Baltic states, it is evident that in other Baltic states main construction materials are substantially cheaper. It is connected with low development of production of construction materials in Latvia. Industry of construction materials depends from import deliveries; as a result, prices are high. Small market volumes do not allow returning invested means in the case of new factory; it is more profitable to transport construction materials in region. Investment volume in Latvian construction industry grew rapidly from 2002 almost doubling every second year. Investment per employed in construction in Latvia is larger than in France, Germany and the EU, but smaller than in Finland, Sweden and UK. In the Baltic states and in Latvia in particular capital investment increase is connected not only with increase of construction volumes, but also with changes in construction process and increase of mechanization level. Also market demand changes played their part. Before 2000 largest part of construction (near 70%) was repair, which is done without expensive mechanisms and machines, however since then multistory buildings construction increased, which demands large capital investments in fixed assets. Also in the Baltic region increase in mechanization level is connected with the increase of wages. In the Euro area money resources are 40-100% cheaper than in other states. In Latvia, as compared with the other Baltic states, interest rates are higher by 1.2 percent points on average and by 1.8 percent points cheaper then the EU average. It means that in the other Baltic states current assets are cheaper by 25%, but in the EU by 47% on average. But even with expensive money resources, on UK example shown, UK construction industry is excellently developed and competitive. Unfortunately one example is not enough to make a conclusion, that industry can be successful despite of interest rates. The reason can be the large scale of construction industry in the UK. With the conditions little Baltic states could not survive. During six years number of employees in construction in Latvia has almost doubled, and similar situation is in the other Baltic states. So rapid increase of employees in construction can be connected with minimal starting point and with boom circumstances. Data dynamics of 2001-2005 show that in Latvia the number of employees rose more rapidly than in developed countries. In 2005-2007 there was the boom increase in the Baltic states. Share of employees in construction industry has been defined, it is 9%. In boom time this limitation didn’t work. For low skilled construction works it is always possible to find workers, paying appropriate wages. In developed countries (Finland, UK) average wages in construction are by 30-55% lower than the average wage in the country. Situation is opposite in Latvia, and in the Baltic states, where wages in construction are 4-10% higher. Value added in construction, which can be seen as a productivity indicator, in Latvia, and in the Baltic states, is about 3 times lower then the average EU level. Workers in Latvia work ineffective, it is possible to raise their productivity at least 3 times. Despite low productivity of Latvian workers, their efficiency is the largest in the EU. Profitability in construction industry in Latvia is between four EU leaders: Poland, UK, Greece, and Latvia. Increase of profit is visible both in the EU and in separate countries. The stable gross profitability level in construction is on average 12%, which is similar in other industries. Its means that the industry provides stable average entrepreneurship factor remuneration for entrepreneurs working in the industry.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20392.

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Date of creation: 2009
Publication status: Published in RTU zinātniskie raksti 11.6(2009): pp. 93-106
Handle: RePEc:pra:mprapa:20392
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  1. Skribans, Valerijs, 2009. "Influence Of Labour Migration On Latvia’s Labour Market," MPRA Paper 16596, University Library of Munich, Germany.
  2. Skribans, Valerijs, 2002. "Construction industry forecasting model," MPRA Paper 16365, University Library of Munich, Germany.
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