The transport sector plays a key role in the Latvian economy due to the country's location. The transport and communication sector accounts for over 14% of GDP. Latvia has the highest net cash flow from trade in transport services, mainly due to the transit flow of oil and related products by railways and pipeline. Freight shipments from Russia and other CIS countries to the West are the core of the transit industry. The centers of the freight transit industry are the seaports of Riga, Ventspils and to a lesser extent Liepaja. About 90% of transit traffic goes to seaports. Rail is the second dominant transport, and is mainly oriented to transit freight. Roads play an important role for freight turnover however the role of truck transport is mainly seen in short hauls. 
  
Roads. The total Latvian road network of 55,168 km is adequate in size for the present and near future traffic volume but the quality of roads is not. The institutions in the road sector have been going through drastic changes since Independence. The Latvian Road Department of the Ministry of Transport has been in the forefront of the transformation process. The Latvian Road Administration manages about 20,000 km of roads; the road construction and design companies have been privatized entirely. Road maintenance and capital improvement are contracted out to the private sector on a competitive bidding basis.  Latvia has become increasingly aware of the environmental impact of road traffic and road activities, and has introduced new environmental laws to mitigate their negative impacts.

 

Road safety in Latvia has improved but the situation is still one of the worst in Europe, with 212 deaths per million of population in 2003. The absolute number of fatalities has declined from 2000 to 2003, however, the number of injured has increased by 22%. Losses to the public caused by road accidents in 2001 were about 190.6 mln Lats.  The issue of road safety has been moving inexorably up the policy agenda in Latvia.  The road safety authorities have been reorganized but need strong international support to undertake measures that will reduce the number of accidents to Western levels.  In an effort to curb the accident rate trend in Central and Eastern Europe, a strategic alliance has been formed between the Dutch program Partners for Roads and the World Bank to jointly contribute to development and incorporation of safe road design. As a result, A Practical Manual on Safe Road Design was published.

 

Railways. Latvian Railway Administration (LRA), established in mid 90s, is one of three regulatory bodies for the rail sector in Latvia. Total length of railway lines is 2269.8 km. The Safety and Technical Inspectorate (STI) is responsible for the railway police, safety standards, regulation, and operator licensing. The LRA oversees railway economics and policy work, environmental protection, competition rules, the registry of rolling stock, freight railway regulation, path allocation dispute resolution, and fiduciary responsibility for national subsidies for passenger rail. Passenger railway operations come under the "Common Regulator" for post, electricity, and passenger rail. Latvian Railways (LDz) is a 100% state-owned joint stock company. Small part of freight and passenger transportation on state owned infrastructure has been performed by newly established private companies.  The major concerns of railway operators are deterioration of railway infrastructure, decreases in the trains’ technical speed, and aged rolling stock. Insufficient funding for maintenance has led to obsolescence of the rolling stock and inability to timely renovate it.  Railway restructuring in Latvia needs to continue in the following: separate commercial operations from rail administration, reduce over-capacity, rationalize tariffs, raise safety levels, and improve railway services.  Future railway investments in renovation of parts of East-West rail corridor and technical improvements of infrastructure are planned during 2003-2007 with funds from the Latvian government, EU ISPA and Conhesion Fund, and other loans.

 

Ports. Latvia has three large ports – Ventspils, Riga, and Liepaja – and seven small ports. In 2003, around 50% of the cargo in Latvian ports comprised of crude oil and oil products, but the share has shown a declining trend.  All major ports are landlord ports, where port authorities are responsible only for major infrastructure maintenance and development, and daily operations are handled by private companies operating under various land lease or rental agreements.  In most ports several stevedoring companies and terminal operators compete hard against each other. However, the fragmented and inflexible long term land lease agreements may hinder the development of modern terminal operations based on scale economy. Stevedoring companies seem to maximize the short-term return on the land area under their control.  There is a strong need to enhance administrative capacity in spatial planning and improve legal tools for expropriation.

 

Aviation. In Latvia, the aviation infrastructure and management remains the responsibility of the public sector. The provision of scheduled air transport services has been partially privatized, by transforming the airlines to joint ventures with established international carriers and other investors. The State owns over 52 % of major airline airBaltic. Passenger traffic has doubled after EU accession.

 

World Bank Studies. The World Bank has recently completed and published the results of the Trade and Transport Facilitation Study in the Baltic States. The study provides a review of international trade and transport, identifies difficulties and necessary measures to enhance trade in the region such as improving procedural and documentary requirements and quality of services and infrastructure to traders. The Third Seminar on Restructuring of the Transport Sector in the Baltic States was held in Vilnius, Lithuania, in February 2005. In addition, two dissemination seminars of the World Bank Toolkit for Public-Private Partnership (PPP) in Highways were held in Riga (September 2004) and in Tallinn (October 2004), focusing on main risks of PPP highway projects. 

 

World Bank Projects. The World Bank’s highway project completed in 2000 financed the improvement of the Latvian road network. While the Bank has no ongoing transport projects in Latvia at the moment and no new project in its lending program, the Bank and the Government of Latvia continue to have a policy dialogue on the Transport Sector.

 

Other activities. In 1996-2001, Latvia invested almost EUR 370 mln in TEN-T transport infrastructure, and plans to invest approximately EUR 500 mln during 2002-2010, half of which is for roads.