Linas Jegelevicius in Vilnius -
Lithuania is suffering a steep fall in foreign investment, but the arrival of Google and other international companies offers a glimpse of a brighter future for the Baltic country as an investment destination.
Lithuanian President Dalia Grybauskaite first announced Google's intention to expand to Lithuania in late January, and local press cited data from Lithuania's Centre of Registers as showing that the US internet giant registered Google Lithuania on March 13.
Although Google’s Lithuania office will not serve as a data centre or project support centre, but rather as a second-tier centre used mostly for sales and promotion of promising Baltic start-ups, such a high-profile arrival cannot be overlooked like the other record-high 29 investments that expanded into Lithuania last year, insists Investuok Lietuvoje (Invest in Lithuania), the agency founded by the economy ministry to promote investments in Lithuania.
Among the investors in 2014 were several US companies, including Intermedix, an IT company providing solutions for health care, American International Group, an insurance company, and Thermo Fisher Scientific, a biotechnology product development company. In addition, there were a number of Nordic companies, like Advantec, a Norwegian oil and gas producer, and Finland’s Ahlstrom, a fibre-based materials company.
Those companies helped bring €163.5mn of investment in 2014, but the broader picture shows a huge fall in the volume of foreign direct investment (FDI) to the country over the last three years. In 2013 the country attracted €353.3mn, and in 2012 it was €544.8mn, according to official data. As of end-2014, cumulative FDI into Lithuania amounted to €12.1bn.
Arvydas Arnasius, a former head of Investuok Lietuvoje, downplays the recent fall, arguing that Lithuania's investment project per 1mn people figure of 6.7 surpasses the European average, and is nearly twice that of Estonia (3.8) and seven-fold that of Latvia (1.0), its Baltic neighbours. “In general, the first half of 2014 has seen a slump in FDI throughout the Central and Eastern Europe [region], but the pace was picking up later throughout the region, and it has been way faster in Lithuania,” Arnasius says.
And if the ongoing talks with 122 other foreign companies pan out, this year could see another handful of new investors arrive, the investment agency says on its website.
Importantly, the types of investors that are coming to Lithuania will create more jobs in the country per 1mn people than is being seen in neighbouring countries, Arnasius claims: 561 jobs per 1mn in Lithuania, compared with 442 jobs in Poland, 246 jobs in Estonia and a mere 114 jobs in Latvia.
And the statistics back the idea of Lithuania becoming more investor friendly. In the World Economic Forum’s latest Global Competitiveness Report 2014-2015, Lithuania’s ranking moved up 7 positions from the year before to 41st position out of the 144 countries ranked. The country does especially well in the education and ‘technological readiness’ categories.
Still, some leading experts remain sceptical. “Well, it is all how we get around the statistics. I personally believe we are doing pretty bad in the FDI sector. We see a trickle, but not a stream, and this is obvious,” says Ausra Maldeikiene, a well-known Lithuanian economist and associate professor at Vilnius University.
And those who resolve to put money in Lithuania do so often because of the low salaries in the very affordable, generally pleasant cities with Western-like atmospheres. “The investors usually are interested only in the largest Lithuanian cities, which can offer the aforementioned, not in the provincial towns, many of which are languishing because of the uneven regional development,” she says.
Benas Gudelis, the main shareholder of the pan-Baltic perfume empire that includes Fragrances International and KristiAna, says the real FDI picture for Lithuania is the one that his business partners perceive. “They tell me this: Poland and Estonia are good for investment in the region, not Lithuania,” he says. “I can tell that investments are on a steep rise in the state of New York, where I am now. Officially, they are up 60%, but I can tell it just by walking down the street or reading a local newspaper, for example.”
He insists he knows why foreign investment is surging in New York: the state exempts foreign investors from tax for 10 years. “I cannot tell of any tax initiative like this in Lithuania,” he notes. And from his personal experience, in Lithuania there are too “many watchdogs, too many constraints”. “And I do not see the investments growing, frankly. The bottom line is that still relatively few people know Lithuania in the States. You say Google is coming? But it’s ubiquitous.”
Dovydas Bajoras, owner of Trys Karaliai, a major event organizer in western Lithuania, believes that the introduction of the European single currency this year should be a big boost for Lithuanian business and FDI. “The missing necessity of currency converting is important to many investors – this is what I feel from my own experience,” Bajoras says.
The other factor in determining the scope of investment, he believes, is a well put together and continuous advertising campaign of the country as an investment destination. “When I think of Lithuania, I’ve got a strong hunch that the advertising is rather lukewarm, focused within one or two agencies. But for a small, pretty much little-known country like Lithuania it has to be an outright priority, like the defence is now,” says the 32-year-old entrepreneur, who is also a teacher at Klaipeda State College.
Bajoras notes that when he visited Dubai this year, he was aghast at the ubiquity of the advertising proclaiming the country’s investment potential. “Imagine seeing and hearing the same message throughout the entire three days’ stay: “Invest in Dubai”, “Why it is easy to invest in Emirates”, “Even if you thought you cannot do it in Dubai, we are here to prove you were wrong!” And this was coming from humongous placards, digital posters, drive-by vehicles-turned-into-advertising-platforms. Even from the lips of exotic fruit vendors in the local market, who were offering not only their fruits, but also booklets on investment opportunities in the United Arab Emirates.” Bajoras recalls.
It was a kind of nuisance, but it got his attention. “I haven't ever considered investing in Dubai, but, well, I definitely keep the city in mind if I’ll be up to the task. The city has prompted me a slew of business ideas. And certainly, I’ve been conveying the Dubai message to all my friends. This is an example Lithuania should be following,” Bajoras says.
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