Everybody would agree that the stereotype of a country with low cost manufacturing and well-trained competitive labour force is China. But one needn’t go far for a market with a similar investment climate. More and more world’s most prestigious companies are sending and developing their business to Eastern Europe, a region which has huge growth potential. One of the countries belonging to this area is Lithuania.
Being a full member of the European Union and NATO, Lithuania offers outstanding business opportunities in a stable political, economic and social environment.
Strategically located as the bridge between the EU and the CIS countries, Lithuania boasts excellent infrastructure for foreign businesses. With 2 out of the 10 priority corridors in Europe, Lithuania was designated by The EU Transport Commission as the transport centre of the region. The country has an upgraded system of European-standard 4-lane highways which link the most important industrial centres. As part of the transportation system around the Baltic Sea and a transportation axis linking Russia and the Baltic Sea, new roads are being built. Lithuania also offers an ice-free port on the Eastern Baltic and four international airports.
Lithuania has one of the best-educated workforces in the region. According to statistics, in 2003-2004 the proportion of students as compared to the total population aged 20-24 in Lithuania was as high as 70% and markedly surpassed the EU average (about 56%). According to the data of the year 2003, the ratio of graduates in natural sciences and technologies to 1000 of population aged 20-29 is one of the highest in Lithuania (relatively higher than in such industrial powerhouses as Sweden or Germany).
Lithuanian labour productivity / labour cost ratio is known to be the highest in the Baltic countries and three times higher than the EU-15 average. In the expanded EU25, Lithuania, together with the two other Baltic States – Latvia and Estonia – still offers the cheapest workforce for the export-oriented FDI. Lithuanians are praised by foreign business people for their high qualifications, loyalty, diligence, and strong motivation.
During the last few years, investment environment in Lithuania has remarkably improved. The World Bank Group Report ‘Doing Business in 2006: Creating Jobs’ named Lithuania one of the World Top 20 economies (15th in the world) and the best of the new EU members on the ease of doing business. Lithuania maintains uncomplicated market entry procedures; the laws are coordinated with those of the EU; businesses are offered free movement of capital and dividends.
When it comes to operating and living costs, Lithuania has significant advantages. A survey carried out in 2004 by DHL and PriceRunner showed Lithuania as the least expensive country to do business in the new EU-10 states.
Lithuania pursues a low-tax policy. In 2004, the tax-to-GDP ratio was 28.7%, the lowest in the EU. The normal profit tax rate is only 15%, and there are long tax holidays in Lithuania’s Free Economic Zones (one in Kaunas and one in Klaipėda). Incentives in these zones include: no corporate tax for the first 6 years and a 50% corporate tax break for the next 10 years (applicable for investments exceeding EUR 1 million); no land, road, or real estate taxes; extensive application of 0% VAT.
The modern banking technologies, investor-friendly lending rates ranging from 5.5% to 6% per year, a rapid growth of e-commerce and the development of digital business-to-business environment also make Lithuania an investment-attractive country.
Most foreign manufacturing companies invest in Lithuania for export purposes. Many local producers have already acquired ISO 9000, ISO 14000, GMP and other certifications. Among the multinationals that have chosen to establish their facilities in Lithuania are Siemens, Philips, Motorola, Kraft Food International, Festo, Lancaster Steel, Partec, Kemira, SEB, Carlsberg, etc.
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