Investment Hopes in Lithuania

A participant of a nationalist organization attends a rally in Vilnius on Oct. 28, a day that marked Lithuania's 70th anniversary of the Red Army's withdrawal from Vilnius. (Photo: Petras Malukas/ AFP-Getty Images)

When it comes to foreign investments, Lithuania is trailing well behind its Baltic counterparts, Latvia and, particularly, Estonia, but very soon there might be some brighter light, even in the lingering gloomy economy downturn.

According to the Lithuanian Department of Statistics, direct foreign investments during the first quarter of 2009 have slumped by 6.9 percent. When compared to 2008, however, the Lithuanian government remains cheerful; several major greenfield investments are about to take shape in the very near future.

Last week a trilateral letter of intent on building an aluminum elements plant in Alytus, a southern city of Lithuania, was signed by the Ministry of Economy, Alytus' Municipality and the U.S. Aviation Technology LLD, a U.K.-based enterprise.

In the fierce competition between Panevezys, an administrative center in the north of the country, and Alytus, an administrative center in the south, Umberto Cisotti, who is the main shareholder of the Aviation Technology LLD, favored the latter.

"During the first phase of the project... we are planning to employ up to 60 people," Cisotti previously told a media outlet. After signing the trilateral letter of intent, Cisotti couldn't be reached for a comment.

Ceslovas Daugela, Alytus' Mayor, was not very collaborative either. "I can't comment on the details of the shaping deal, so far. It's our bilateral agreement. We got in touch with the entrepreneur through LDA, the Lithuanian Development Agency. I could possibly disclose more details on the deal in the beginning of September, when the investment contract is finally signed," Daugela said.

When asked what helped Alytus outmuscle Panevezys in such a fierce competition for the investment, Daugela responded that Dzukai (inhabitants of the ethnical region in the south of Lithuania) "have outpoured all their hearts towards the investor. We approached him with simplicity of our proposals and a quick response to their wishes. Both cities came up with pretty much similar proposals, but the human factor has helped us to inch a bit closer." The mayor defines the investment as "average."

There is a rumor that, among other appealing proposals, the city of Alytus exempted the U.S. Aviation Technology LLD from spiky land tax for three consecutive years. If everything goes well, the company is planning to launch mass production within a year. Other foreign companies are eying their possibilities of investing into Lithuania's gloomy economy as well.

No-Burn Europe, a-UK based company, which produces PINQY extinguishers, is currently in talks with the Ministry of Economy about building its plant in Lithuania. "So far, we are just measuring the volume of the investment, but it would be very big, indeed, up to hundreds of millions of euros. I am glad that we are advancing in the talks," Mark Gaskel, executive director of the company, said. There is a possibility that both sides will sign a letter of intent in the upcoming weeks.

The British company Meditrox, together with its Lithuanian business partners, would like to invest in production of medical equipment that exterminates bacteria at hospitals. The initial investment would take approximately 15 million euros. It would be a long-term project, which could create a value of hundreds of millions of euros. The representatives of Meditrox have already conducted preliminary talks with the Ministry of Economy, and are to finally choose their Lithuanian business partners in September.

Also, a-UK based company, Centrikomp, is looking for business partners in Lithuania to start production of turbines. The investment, as it is estimated, would be of 5-10 million euros; the British are to finalize their search for business partners in September.

British bank Barclays previously announced its intentions of 170 million litas of investments in Lithuania. IKEA, the Swedish giant of Scandinavian-style furniture and accessories, ponders its expansions plans into Lithuania; the investment project would reach a few tens of millions of euros.

Does that mean that Lithuania is exuberantly shaking off the image of a country that is less attractive to foreign investment than its neighbors? Vice Minister of the Ministry of Economy Arnoldas Burkovskis remains upbeat. "Lithuania has recently advanced a lot by improving its laws and regulations, related to foreign investments. Lithuania has become much more attractive to foreign businessmen. Foreigners come here, they compare the current situation to what they saw before, and they say, 'Hey, we like it here!'" When asked about the concrete improvements in the investment policy, the vice minister quipped, "Do you want to hear it all? It would take a while to name them."

Burkovskis acknowledged that the above-mentioned possible investment plans have moved far beyond talks. "It has stepped up to the point where, at least, letters of intent or, mostly, investment contracts will be signed soon," he said. He admitted that a handful of foreign investments could possibly outstrip Barclays of 170 million litas, but he refrained from naming them.

Director of the Department of Investment and Innovation of the Ministry of Economy Laimute Kalinauskiene is convinced that profound amendments in laws and regulations have helped to lure foreign businessmen to Lithuania—regarding, namely, foreign investment environment, simplified procedures of spatial planning, newly founded industrial parks, exemption from several taxes, national financing of the most important projects, and the E.U. financial assistance.

Lithuania is taking advantage of being a small country with a relatively small but effective labor market. Just a few years ago, one couldn't find 500 qualified workers for an investor; now there's no problem with that. Also, labor costs have become considerably lower, so, with what we see globally, many foreign investors are moving their businesses from more expensive countries to cheaper ones. "Downturn is a great time to invest—foreign businessmen are well aware of that—and we have to take advantage of the situation," Kalinauskiene said.

View the Worldpress Desk’s profile for Linas Jegelevicius.