Fibenol plans to build the plant on a 26-hectare site in Valmiera municipality, approximately an hour from the Estonian border. The company said it will be the most modern facility in the world in its sector.

Preparatory work, construction and equipping of the plant with the necessary technology is expected to cost around €700 million.

The production of biomaterials will start in about five years' time and the company plans to export 90 percent of its production.

Valmiera was chosen because of its infrastructure, the railway nearby and the possibility to hire a skilled workforce, LSM wrote.

The Ministry of Economics said a foreign investment of this size is rare in Latvia and will significantly benefit the economy.

"The increase in the overall Latvian economy, in the gross domestic product, which this newly established factory will be able to provide, is from 0.5 to 1 percent every year," said Viktors Valainis, Latvia's minister of economics.

That an Estonian company has chosen to expand its business in Latvia, rather than Estonia, has been seen as a worrying by Estonia's politicians.

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