Lithuania – attractive country for investments
Remigijus Kabečius Director General Lithuanian Development Agency The flow of foreign direct investment (FDI) during the first quarter of 2004 increased by 39, 6 percent in comparison with the same period last year. The growth of FDI is associated with the membership of Lithuania in the EU.
Noteworthy that businessmen from the Far East started to show their interest in investment possibilities in Lithuania. This year the biggest green field investment reached Lithuania exactly from that region - Thailand. Thailand business group ‘Indorama’ started to build PET factory ‘Orion Global PET’. Investments to the new chemical factory will reach 297 million Litas. Thailand businessmen say that their choice for green field investment in Klaipėda was due to favourable economic conditions, comfortable geographical location, and the entrepreneurship of the seaport people.
As Vinod K. Gupta, Vicepresident of ‘Indorama’, said, there was one more reason why Klaipėda was chosen. He noted that in his native Thai language word ‘Klai’ means ‘near’, and word ‘Ped’ means ‘diamonds’. So Klaipėda for them is ‘the place near diamonds’.
We can’t rely just on favourable names of our cities so I would like to make an overview of the objective reasons why Lithuania looks attractive for foreign investors.
Lithuania has many competitive advantages that make it attractive to foreign direct investment. It has been the fastest growing economy in Central and Eastern Europe since 2002 (GDP growth reached 9, 7 percent in 2003), while inflation has been the lowest in the region. We fulfill all the Maastricht criteria for joining the euro, even while some of the older EU countries do not.
Among many factors that make Lithuania an attractive investment destination I would highlight the following factors.
Data from UNESCO and ‘Eurostat’ shows that the population is among the most educated in Europe in all age groups between 30 and 59. Our education level is considerable higher then that of Latvia and Estonia, and is double the EU average. Lithuania, a country of 3, 5 million people, has 43 higher schools, 19 universities and 24 colleges. Vilnius University, founded in 1579, is one of the oldest in Eastern Europe. Kaunas Technological University is the largest technical university in the Baltic countries. This all helps to develop activities with high value added in Lithuania.
Lithuania’s labor costs are low, and wages are growing at a slower rate than GDP. The average hourly wage is eight times below EU average, and 1, 2 times below the average wage level in new EU countries. In addition to the relatively low labor costs, Lithuania can also offer competitive production, communication, construction, transport and other service costs.
Lithuania’s infrastructure projects have attracted massive investment both from the government and from European and other international funds since 1990. The country has one of the best road networks in the region between Warsaw and Tallinn, four international airports, the ice-free seaport of Klaipėda and a free economic zone adjacent to it, well-developed fixed line and mobile telecommunications, oil and gas pipeline networks, and an offshore oil terminal. It has a modern banking system, with foreign investors owning 90 percent of the banks’ capital.
Its good geographical position, coupled with its well-developed transport infrastructure, ensures that cargoes such as raw materials, components and manufactured products are shipped to Europe and the former Soviet countries in a short period of time.
Lithuania has a technology orientated education system covering the electronics and IT sectors, biotechnology and pharmaceuticals, and equipment and machinery production. Advanced biotechnology and state-of-the-art technologies in the fields of electronics, electromechanics and textiles are used.
The tax system is ranked by ‘Forbes’ and ‘Ernst & Young’ as one of the most liberal in Europe. The corporate tax rate of 15 percent is among the lowest in Europe as well.
In the year 2004 Lithuania joined both the EU and NATO, which will help boost confidence among those willing to take full advantage of the free movement of goods and services in the Common Market.
For the mentioned reasons amount of the foreign investments should increase in the future. Many foreign-owned companies that are operating here are already planning to increase their investment as well. Among the factors that will encourage further investment will be the possibility of applying co-financing of projects from EU funds. Privatization projects are set to continue as well.
In the World Bank report on investment climate, presented on September 2004, Lithuania was ranked among Top 20 most favourable investment climate countries in the world, and was the best among new EU entrants. In the same World Bank report Lithuania was among Top 10 best economic reformers in the world during last years.
Its likely that Lithuanian government will continue to improve business conditions and Lithuania will stay among the most favourable destinations in the world for foreign investors. | | |
