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INVESTMENT CLIMATE IN LITHUANIA
Laimutė KalinauskienėDirector of Investment and Innovation Department of the Ministry of Economy of the Republic of Lithuania
May 2007, Klaipėda
Lithuania - strong European market player
EU and NATO membership Conveniently located between Western and Eastern markets Favorable climate for business (easiest to do business among the Baltic States) Rapid and stable economical growth, small inflation, descending unemployment rate Skilled and cost-effective labor force Most diversified industry base in the Baltic States EU financial support, transparent policy (national law adopted to EU acquis) Flexible institutional assistance
Lithuania in figures
2003 2004 2005 2006 2007*
GDP 10.3 % 7.3 % 7.6 % 7.5 % 7.2 %
FDI (EUR bn) 3.8 4.7 6.9 8.3 8.9
Exports (EUR bn) 6.4 7.4 9.5 11.4 -
Imports (EUR bn) 8.8 9.8 12.4 15.5 -
Inflation -1.3 % 2.9 % 3 % 4.5 % 3.9 %
Unemployment12.4 % 11.4 % 8.3 % 5.6 % 5.2 %
Source: Lithuanian Department of Statistics, DnB Nord, Lithuanian Department of Statistics;*Forecasts by Lithuanian Bank, Ministry of Finance, Ministry of Economy, Lithuanian Department of Statistics, European Commission, International Monetary Fund, LDA
110 million North European consumers
Almost 500 million EU consumers
250 million CIS consumers
In-between huge markets
Integrated part of Baltic Sea Region (BSR)
• More than 40% of Lithuania’s trade (exports EUR 2 bn, imports EUR 3 bn in 1H 2006)
• About 50% of FDI in Lithuania (EUR 3 bn in 1H 2006)
Business Freedom in selective countries in 2007
No. 12 – EstoniaNo. 22 LithuaniaNo. 41 LatviaNo. 87 PolandNo. 120 Russia
Sources: The Heritage Foundation
No. 87
No. 120No. 12
No. 41
No. 22
SURROUNDED BY THE MOST COMPETITIVE ONES: Global Competitiveness Indexes 2006
Source: World Economic Forum
No. 1
No. 10
No. 12
No. 2
No. 3 No. 25
No. 4 No. 36No. 40
No. 14
No. 34
Trans European network
Great labor quality and cost ratio (1)
Approx. 20% of high education students graduates in engineering
Bachelor and Magister’s engineering education (automatics, electro-engineering, electronics, telecommunications, electrical engineering etc.) is provided at universities in five major cities of Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys.
Over 20 000 students graduate high education each year.
Great labor quality and cost ratio (2)At the begining of 2007
Average monthly salary 480 EUR Industrial workers 305 EUR Officers 528 EUR IT specialists 568 EUR Engineers 434 EUR
Low-tax environment
Corporate tax 15%+3% (2006; to be reduced to 15% by 2008; for small companies 13%+3%)
VAT 18% (and less)
Dividends 15% (0% for the EU parent companies)
Personal income tax
27% (to be reduced to 24% by the end of 2007)
Locations for Greenfield investment
Akmenė
Visaginas
Kėdainiai
Alytus
Marijampolė
Free economic
zones
Industrial parks
Free Economic Zones
FEZ – territory for economic-commercial and financial activities with special economic and legal conditions of operation.
Companies in FEZ are free from corporation tax for 6 year, which later is reducing by 50 percent.
No VAT, excise and customs duties.
Two FEZ for the moment: Klaipėda (205 ha) and Kaunas (534 ha)
Industrial parks
Overall territory
Distance from Vilnius airport
Distance from Klaipėda seaport
Šiauliai 138 ha 214 km 161 km
Kėdainiai 135 ha 139 km 208 km
Visaginas 33 ha 158 km 453 km
Panevėžys 49 ha 135 km 240 km
Marijampolė 67 ha 139 km 231 km
Alytus 60 ha 105 km 294 km
Akmenė 32 ha 290 km 166 km
FDI by economic activities (8,3 bn EUR as of January 1, 2007)
Other 22,5%
Trade 10,7%
Financial intermedia-tion 16,0%
Manufactu-ring 39,9%
Transporta-tion and
communica-tion 10,9%
Other 21,4%
Germany (4) 9,9%
Finland (5) 6,7%
Russia (6) 6,3%
Poland (1 place) 22,6%
Denmark (2) 15,3%
Sweden (3) 10,6%
Major investors in Lithuania(as of January 1, 2007)
Attracting of foreign direct investment
Government of the Republic of Lithuania pays big attention to attract foreign direct investment.
Investment promotion program
Agricultural and rural
development; 4.17 billion EUR
Decommissio-ning of the
Ignalina NPP; 0.83 billion EUR
Structural support; 6.77
billion EUR
EU support to Lithuania for 2007 – 2013 (11.8 billion EUR)
Of which:
R&D and technological development – 0.67 billion EUR;
Business efficiency and environment – 0.46 billion EUR;
Energy – 0.43 billion EUR;
Tourism development – 0.26 billion EUR.
Investment Environment AssessmentChanges in conditions for business and development in Lithuania based on the Report “Doing
Business 2007”
2006 2005 Changes in rankingBusiness conditions, including: 16 15 -1Starting a business 48 44 -4Dealing with licences 23 22 -1Employing workers 119 119 0Registering property 3 2 -1Getting credit 33 33 0Protecting investors 60 58 -2Paying taxes 40 42 +2Trading across borders 32 31 -1
Enforcing contracts 4 5 +1Closing a business 30 28 -2
Source: World Bank, figures denote the country’s ranking in the world
Source: European Innovation Scoreboard‘2005
EU Member States by cumulative innovation capacity index and its growth tendencies
According to cumulative innovation capacity index and its growth tendencies the EU Member States may be grouped in 4 categories: Category I – “Leading countries”: Finland, Denmark, Sweden, Germany and Switzerland. Category II – “Average performance presenting countries“: France, Luxembourg, Ireland, the United Kingdom, the Netherlands, Belgium, Austria, Italy and Iceland.Category III – „Catching up countries“: Lithuania, Slovenia, Hungary, Portugal Czech Republic, Greece, Cyprus and Malta. Category IV – “Losing ground countries“: Estonia, Spain, Bulgaria, Poland, Slovakia, Rumania and Turkey.
Doing Business Across Categories, Selected Countries
2006 Rankings
Ease of Doing Business
Enforcing Contracts
Registering Property
Dealing with Licenses
Paying Taxes
Portugal 40 35 98 115 61
Norway 9 3 6 14 16
Denmark 7 1 36 6 15
Lithuania 16 4 3 23 40
Germany 21 29 42 21 73
Poland 75 112 86 146 71
Russian Federation
96 25 44 163 98
Singapore 1 23 12 8 8
United States
3 6 10 22 62
Source: World Bank
Lithuania in the World and in the EU
World’s 6th best reformer(World Bank, 2004)
Most attractive EU country for investments(Centre for Economics and research LTd., the UK, 2005)
Easiest place to do business among new EU states(World Bank, 2005)
Euro is almost reached(The Economist, 2006)
Investment drivers in Lithuania
Low-tax environment
Excellent logistic location and infrastructure
Skilled labor force / cost ratio
Rapid development of 7 industrial parks
Tax incentives in 2 free economic zones
Legal acts on investments comply the EU standards
International investors
International investors come to Lithuania due to beneficial environment for investment, relatively small taxes and favorable business climate. Below you can find only a part of them:
Priority
Not to enlarge investment flows, but enhance quality of investment:
regional ICT/financial/business service centers centers of logistics
centers of scientific research manufacturing enterprises for regional needs
Presumptive result: production of higher value goods and cumulative economic with increased export
FDI = high technologies of high productivity + small need for labour force:
Lithuania is open for the investment Lithuania is open for the investment AGAINAGAIN!!
WWW.BUSINESSLITHUANIA.COMWWW.VERSLOVARTAI.LT