Lithuania has been named as one of the most successful economies of the entire EU. Experts and analysts at the International Monetary Fund (IMD), World Bank, Economist Intelligence Unit (the research subdivision of “The Economist” magazine), the European Commission, etc. observe that Lithuania is maintaining an exceptional economic progress, based on macro stability and economic flexibility. The flexible product and labour market as well as strong international trade have laid the foundation for Lithuania’s success.
Economic reforms in Lithuania, which joined the EU in 2004, have resulted in one of the highest economic growth rates among the 10 new EU Member States. Lithuania maintained a stable average GDP growth of 7.8 percent during 2000–2006, one of the highest growths in the entire EU. According to the data of the Lithuanian Department of Statistics, in 2006 Lithuania’s GDP increased 7.4 percent, and it has been forecasted that it will grow by the same percentage in 2007.
Moreover, international experts have been stressing that Lithuania is a country with very low economic and political risks. In its internal market scoreboard, published in 2006, the European Commission acknowledged Lithuania as best implementing EU internal market laws among the Baltic States.
The World Bank in its report “Doing Business in 2006: Creating Jobs” announced Lithuania to be the easiest place to do business among the Baltic States and all new EU-10 members. Furthermore, the “FDI Magazine” of the Financial Times Group surveyed 140 European cities and regions and already twice awarded Vilnius, the capital city of Lithuania, the title of “Baltic City of the Future”, while the metropolis of Kaunas and Vilnius Region was named “Baltic Region of the Future” for the largest economic development potential in the region.
Investment and Business Drivers
Lithuania offers foreign business enterprises and potential investors a knowledge-economy-oriented economic environment located in an extremely convenient geographic location, an excellent infrastructure and logistics system, one of the most qualified human resources in the EU, and a number of investment incentives in free economic zones, industrial parks, etc.
Attractive Location and Excellent Infrastructure
Lithuania is strategically located at the gateway between huge markets in the North, East and West. The country provides fast access to the dynamic regional and eighbouring markets – rich Scandinavian, fast-growing Baltic, huge CIS and West European – within a 500 km radius. The European Union has recognised Lithuania as the prime transport centre in the region linking the EU with the East. At the crossroads of a number of markets, investors and businessmen find it really convenient to use Lithuania’s ice-free seaport, which is the most important and the biggest Lithuanian transport hub, connecting sea, land and railway routes from East to West and providing high-quality services complying with the requirements of the EU. In addition, Lithuania has a wide and well-developed network of high-quality roads and highways; the best in the Baltic States. Direct rail routes link Lithuania with Russia, Belarus, Latvia, Poland, and Germany. The main transit route between Russia and Russia’s Kaliningrad Region passes through Lithuania. Direct flights to major European cities are available from Lithuania’s international airports. Map
Knowledge Economy
Lithuania’s economic policy is strongly innovationoriented. The country belongs to the common EU technological market and holds the sixteenth position among the EU-25.Lithuania was once known as the Soviet Silicon Valley. The country has strong research and development potential. Lithuanian world-class specialists cooperate with NASA, NATO, Volvo, Saab, Philips, and many others in the fields of biotechnology, biochemistry, laser optics, chemistry, physics, etc.
Lithuania has six science and technology parks which develop favourable infrastructure for the establishment of new innovative businesses in Lithuania and encourage the growth of existing ones engaged in the development of innovative technologies. Lithuania’s science and technology parks seek to provide a comfortable environment for commercializing R&D activities and integrating business, science, and research by supportingknowledge transfers leading to the exploitation of research results and to the development of marketable products and services. According to the 7 Economist ntelligence Unit (EIU) in 2006, Lithuania demonstrated an advanced e-business environment. Lithuania was acknowledged as one of the emerging markets where mobile phone penetration is several times that of fixed lines. This, plus a rapid increase in the number of WiFi hotspots in its capital and other cities, has helped improve overall connectivity for its consumers and businesses. In Lithuania, e-banking, e-government services and mobile internet are being used in everyday business and life and are becoming increasingly popular.
Lithuania has six science and technology parks which develop favourable infrastructure for the establishment of new innovative businesses in Lithuania and encourage the growth of existing ones engaged in the development of innovative technologies. Lithuania’s science and technology parks seek to provide a comfortable environment for commercializing R&D activities and integrating business, science, and research by supportingknowledge transfers leading to the exploitation of research results and to the development of marketable products and services. According to the 7 Economist ntelligence Unit (EIU) in 2006, Lithuania demonstrated an advanced e-business environment. Lithuania was acknowledged as one of the emerging markets where mobile phone penetration is several times that of fixed lines. This, plus a rapid increase in the number of WiFi hotspots in its capital and other cities, has helped improve overall connectivity for its consumers and businesses. In Lithuania, e-banking, e-government services and mobile internet are being used in everyday business and life and are becoming increasingly popular.
Quality Human Resources
Lithuania has one of the best-educated workforces in Central and Eastern Europe. The percentage of the Lithuanian population with higher education is two times higher than the EU-15 average and is also the highest in the Baltic States. Lithuania is one of the five EU members with the highest percentage of people speaking at least one foreign language. 90 percent of Lithuanians can speak at least one other language – mostly Russian, English and Polish – apart from their mother tongue.
Hi-tech studies are currently among the top choices at the universities of the former Silicon Valley. Major Lithuanian companies specializing in knowledgedriven sectors of industry, such as the information and telecommunications sector, biotechnology, laser technology, etc., cooperate closely with the leading Lithuanian technological universities, which provide the companies with R&D services and offer students specialized on-the-job training programs. In this way companies are able to attract a large number of qualified specialists for both local and international projects.
Hi-tech studies are currently among the top choices at the universities of the former Silicon Valley. Major Lithuanian companies specializing in knowledgedriven sectors of industry, such as the information and telecommunications sector, biotechnology, laser technology, etc., cooperate closely with the leading Lithuanian technological universities, which provide the companies with R&D services and offer students specialized on-the-job training programs. In this way companies are able to attract a large number of qualified specialists for both local and international projects.
Cost-effective Business Environment
Besides the least expensive human resources in the EU, Lithuania offers the least expensive loans among the Baltic States. Yearly interest rates on long-term loans from Lithuanian banks amount to 7 percent; on short-term loans – 5 percent.
Investment Incentives
Investment IncentivesLithuania offers equal protection and guarantees for both local and foreign businesses. The country guarantees unrestricted movement of capital and dividends and free access to all sectors of the economy. Lithuania offers equal protection and guarantees for both local and foreign businesses. The country guarantees unrestricted movement of capital and dividends and free access to all sectors of the economy. The support network and incentives for foreign investors in Lithuania include the following main elements:
• free economic zones with tax benefits and one-stopshop services;
• free economic zones with tax benefits and one-stopshop services;
• industrial parks with developed infrastructure;
• EU Structural Funds support;
• science and technology parks, etc.
Lithuania’s two free economic zones are located in the country’s economically important centres – near the cities of Kaunas and Klaipeda – and provide favourable conditions for developing business activities. Incentives in Lithuania’s free economic zones* include:
• no corporate tax for the first six years and a 50 percent corporate tax reduction for the next 10 years (applicable for investments exceeding EUR 1 m);
• no road and real estate taxes;
• extensive application of 0 percent VAT.
* Total amount of incentives received by a company may not exceed 65 percent for small enterprises and 50 percent for medium and large enterprises of investment into long-term assets.
Eight industrial sites in Lithuania will be ready for business use as industrial sites in 2008–2009. The size of the industrial parks will range from 50 to 210 ha and will be subdivided into smaller parcels corresponding to the investor requirements. The land will be leased to the investors for long-term periods at favourable prices. infrastructure will be brought to the investor’s land plot free of charge. For land lease matters investors are encouraged to approach the Lithuanian Development Agency and municipalities, which will own industrial parks.
EU Structural Funds Support
Both local and foreign businesses, having decided to expand their activity to the Lithuanian market, can apply for EU Structural Funds support. In comparison with the EU financial support for 2004–2006, when Lithuania received € 895 m, EU support for Lithuania for the period of 2007–2013 is more than eight times larger – approx. € 7 bln.
Furthermore, international rating agencies have classified Lithuania as a “higher investment rating” country and set higher credit ratings for Lithuania.
FDI Flows and Foreign Trade Growth
Foreign direct investment (FDI) flows to Lithuania are steadily growing. In 2005 and 2006, FDI in Lithuania grew about 16 percent. In 2006, investments from EU-25 countries made up 69.3 percent of total FDI; CIS countries’ investments made up 20.3 percent of all investments. The major investor countries are Russia (20 percent), Denmark (16.3 percent), Sweden (11.7 percent), and Germany (10.5 percent).
Strongest Industries
Lithuania’s integration into the EU resulted in faster growth of foreign trade. Improvements in export conditions gave strong momentum for exports of goods and services, which in 2005, according to the estimates of the Lithuanian Department of Statistics, exceeded the 2004 level by 27.1 percent. It was the fastest export growth in the last five years. In addition, imports of goods grew 25 percent in 2005. According to the Eurostat, Lithuania’s foreign trade growth was one of the most successful in the EU in the 1st half of 2006. Also, Lithuania’s foreign trade has been the most active of the three Baltic States.
Strongest Industries
Lithuania has been maintaining the most diversified industry base in the Baltic States, offering a wide variety of investment opportunities. Biotech, laser industry, metal processing and transport equipment manufacture, machinery and electric equipment manufacture as well as ITT, business services, and food industry are among the most promising sectors in the Lithuanian market.
Biotech
Lithuania is widely distinguished among Central and East European countries as an absolute leader in the field of biotechnology. Lithuanian biotech companies are regarded as the most advanced in Central and Eastern Europe and successfully compete in Europe and North America. International experts at Ernst &Young declare that Lithuanian biotechnology companies hold immense future development prospects. Lithuania’s biotechnology firms, mainly concentrated in the capital, export products to 42 countries around the world and are rapidly expanding with the help of foreign investments.
Lasers
Lithuanian laser companies have over 50 percent of the world market for high-energy pico-second lasers, and are leaders in global production of ultrafast parametric light generators. Lithuania’s laser producers export laser technologies and devices to nearly 100 countries, including EU members, the US, Japan, Israel, and Switzerland, mostly for universities and corporate laboratories for scientific research purposes, aiming to further integrate lasers into machine tools and industrial equipment. Lithuanian laser technology scientists have created unique laser devices: a pico-second laser spectrometer for selective activation and probing, a device for measuring the thickness and profile of unfinished glass at the television picture tube screen factory, a non-contact laser measuring device to control the level of the mass of glass in a casting furnace, a medical laser scalpel, etc.
The metropolis of Vilnius and Kaunas, the largest cities of Lithuania, is an extremely strong biotech and laser development centre. The strongest laser and biotech companies of Lithuania as well as of Eastern Europe as well as science and technology parks and research centres concentrate in this region.
The metropolis of Vilnius and Kaunas, the largest cities of Lithuania, is an extremely strong biotech and laser development centre. The strongest laser and biotech companies of Lithuania as well as of Eastern Europe as well as science and technology parks and research centres concentrate in this region.
Lithuanian Development Agency
Sv. Jono st. 3, LT-01123 Vilnius
Tel. +370 5 262 7438
Fax +370 5 212 0160
info@lda.lt
www.businesslithuania.com
Sv. Jono st. 3, LT-01123 Vilnius
Tel. +370 5 262 7438
Fax +370 5 212 0160
info@lda.lt
www.businesslithuania.com
