Latest trends in the
Baltic States
GDP, 2009, 2010 and 2011*, %
Source: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsieb020, SEB
*- data for 2011 remain as forecast (SEB)
2
The Baltic States’ economy, GDP in 2009
Single region from Scandinavian perspective, however …
% of total 59 bn. €
in 2009:
•Estonia-13.86 bn. €
•Latvia-18.845 bn. €
•Lithuania-26.87 bn. €
Source:
http://www.stat.gov.lt/lt/news/view?id=8860;
http://www.liaa.gov.lv/eng/home/latvia_in_facts/
http://www.eestipank.info/dynamic/itp2/itp_report_2a.jsp?reference=503&className=EPSTAT2&lang=en
3
Why Baltic is in an ideal position to take advantage of these new
opportunities
• EU Country
• Good
location
distribution
• Less expensive labor
• Available competence
• Geographic
proximity
and shorter distance to
deliver goods and minor
environment impact
• Raw materials
• Flexible and
deliveries
complex
• Quick recall and replace
of delivered products
for
• Entrepreneurial
• Favorable
exchange rate
currency
• Time difference
4
Latest developments to improve environment for
sourcing / relocation in the Baltics
• Growing competitiveness
multifactor productivity
through
labor
• Large investments through EU structural funds:
– upgrade equipment
– programs for employee education
– innovation component
– newly built factories
– developing infrastructure (ports, border
customs, logistics)
– market surveys and partner search
and
and
5
Low costs any longer?
• The representatives from Western countries and business do
not see the Baltic countries as a low wage locations any longer
• This is a place of well trained, talented individuals who are
available at a fair wage level
• Baltic countries have a competitive advantage in medium to
high technology industries
• Because it will never be as cheap as Southeast Asia
• but at the same time, the costs for a multinational company of
employing a skilled specialist or graduate in the Baltic countries
will never be as high as it is in the Western and Nordic Europe
6
Major indicators / region
Indicator
Estonia
Latvia
Lithuania
Sweden
Denmark
Corporate profit tax,
% (2010)
21
15
15
26.3
25
VAT, % (2010)
20
22
21
25
25
GCI, ranking (20102011)
33
70
47
2
9
Electricity from
renewable sources,
% (2009)
5.1
49.3
7
60
29
Corruption
perceptions index,
ranking (2010)
26
59
46
4
1
Source:
http://www.tmf-vat.com/vat/eu-vat-rates.html
http://www.bdo.dk/Publikationer/Publikationer/Payment%20of%20corporate%20income%20tax.pdf
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsdcc330
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf
7
Strategic Location / springboard Lithuania
• 500 million consumers at one stop: a
springboard to the single European market
(over 500 million consumers) as well as
emerging Eastern European markets
• Europe’s prime transport hub: two TransEuropean transport corridors crossing the
country
• Innovation-driven knowledge economy: global
laser, biotech and ICT player
• Competitive
business
operation
costs:
productivity-driving profit tax incentives for
R&D, tax “holidays” in free economic zones;
competitive wages and rent rates
• Stable political and economic environment,
ensured by the EU, NATO and WTO
8
membership
Economic Indicators
Average
Average
Corporate Median Minimu Average
Number of
GDP
Inflation (over Tax Rate
Gross
m
Wage
foreign
Growth most recent 3(%)
Weekly Monthly Growth
languages
(over most year period)
Pay
Wage (percent) spoken as a
recent 3(Euros) (Euros)
percentage of
year
the population
period)
2007
2007 - 5.8 %
9.8%
2008 - 11.1 %
2008
2009 - 4.2 %
2.8%
2010 - 1.1 %
2009 14.8%
2010
1.6%
15 %
(FEZ
incentive 0% for the
first 6 years,
50%
deduction
10 following
years)
137,41
(EUR)
231,7
EUR
14%
(2007 –
2009)
English 37.9%
Russian 87.2%
German 20%
Polish 15%
Average
number of
languages 1.9
9
Lithuania's export and import to Sweden,
mln. EUR
Trade and investments
between major partners
and Lithuania
700
600
500
400
300
200
100
0
2006
2007
2008
Export
Number of companies, invested in
Lithuania
2009
2010
Import
Investments to Lithuania, x 1000 EUR)
Finland
Finland
Sweden
Sweden
Poland
Poland
Denmark
Denmark
0
50
100
2010 Q3
150
200
2009 Q3
2008 Q3
250
300
0
200000 400000 600000 800000 1000000 1200000 1400000 1600000
http://www.stat.gov.lt/lt/news/view?id=9013&PHPSESSID=f9e0006381cee52513fb133b3d28517a
2010K3
2009K3
2008K3
10
Average monthly wages in Lithuania, EUR, brutto,
2010 Q3
Source: www.stat.gov.lt (http://db1.stat.gov.lt/statbank/default.asp?w=1280)
11
Taxes
Lithuania
Czech
Finland
Republic
Hungary
Poland
Romania Slovakia Ukraine
Corporate profit tax
15
19
26
19
19
16
19
25
VAT
21
20
22
25
22
19
19
20
0* - 15
15**
28
10 – 25
19
16
-
15
Personal income tax
15 (+ 6%
health
insurance)
15
6,5 – 30
17 – 32
18 – 32
16
19
15
Social security paid
by the employer
31 (+ 3% for
employee)
34
20 – 23
28.5
30 – 35
32,1 –
33,2
35.2
36,88
0,3 - 1
10
CZK/m2
0.6 –
1.35
2–4
20,51+0,7
7 PLN/
m2
5 – 10
***
Up to 1
Dividends
Real estate tax
* 0% tax on dividends applies when an investor controls at least 10% of voting shares in the enterprise for a period of at least 12
months.
** dividends paid by Czech companies to parent companies located in EU member states, Norway, Iceland and Switzerland are
exempt from withholding tax if the parent company maintains a holding of at least 10% for uninterrupted period of at least 12 months.
*** levied by municipal authorities.
12
World-class Logistics
Trans-European corridors
The designated the two North-South highway, and the rail route connecting Scandinavia
with Central Europe, as well as the East-West route linking the eastern markets with the
rest of Europe, are among the 10 most important in Europe (EU Commission )
Railway network
Railway network running a total of 1,750 kilometers. Broad gauge provides direct link to
Latvia, Poland, Belarus, and Russia (the Kaliningrad Region) as well as a link to Poland.
Container train VIKING (www.litrail.lt) operates from Klaipeda to Belarus, Ukraine and
further to Turkey, Kazachstan
Best roads in the region
Though small in size, Lithuania boasts a 21,000 kilometers road system - known to be the
best in the region. Lithuania is committed to investing 145 million EUR into the Via
Baltica international highway, and 100 million EUR into three public logistics centres.
Ice-free seaport at Klaipėda (www.portofklaipeda.lt)
The northern-most ice-free port in the Baltic Sea, and is capable of handling over 40
million tonnes of cargo annually. Currently the Klaipėda seaport is capable of handling
dry-cargo carriers up to 80,000 DWT, and tankers up to 150,000 DWT.
International airports
The three strategically located international civilian airports are located in Vilnius,
Kaunas, and Palanga. Superb facilities for passenger and cargo traffic.
Logistics centres
The greatest supply of modern warehousing facilities in 2009 remains in Vilnius (341,800
sqm, growth – 17,8%), with Kaunas following in second place (160,200 sqm, growth –
0,13%), and Klaipeda in third (103,800 sqm, growth – 23,5%).
13
Ready for Business Locations
•Two Free economic zones - in Kaunas (www.ftz.lt) and
Klaipėda (www.fez.lt)
•Advanced industrial clusters utilize the logistical advantages
(port, airport, highways) and provide favourable conditions for
developing manufacturing activities: sites with physical
infrastructure, support services, and tax incentives (0%
corporate tax during the first 6 years and only 50% o over the
next 10 years)
•Four industrial parks (IP)
•prepared for business use with all the necessary infrastructure
(electricity, gas, sewerage, roads, etc.). The land is leased for
long-term periods at remarkably competitive prices.
Infrastructure is brought to the investor’s plot for free.
•Most industrial parks offer land and real estate tax incentives.
•Five integrated science, studies and business centres (valleys)
•Lithuania is investing almost EUR 300 M of the EU Structural
Funds support to develop 5 integrated science, studies and
business centres (valleys
Incentives
•
•
Direct cash grants to subsidize construction, equipment and salary costs (Invest Lt+
program).
Average amount of support is 20-30% of the total investment amount and varies depending
on the parameters of the project (number of jobs created, size of investment, percentage of
exports, etc.). Average amount of support for project in R&D average support is 20-25%).
•
Support for the personnel trainings up to 60% of the training costs needed for the investment
project (up to 2 million EUR per project, up to 2600 EUR per one employee).
•
•
Corporate tax incentives
0% of profit tax in first 6 years and 50% reduction of profit tax value in next 10 years, no real
estate and land taxes in Free Economic Zones.
•
•
Land / real estate tax incentives
Land (1,5%) and/or real estate (0,3-1%) tax relieves through local municipalities where
company is operating.
•
Support for the R&D centre establishment (up to 70% of R&D centre establishment costs, EU
Structural Funds program Intellect+). Triple deduction - expenses incurred by companies while
carrying out R&D as well as by acquiring R&D carried out in EEA countries or countries with
DTA can be deducted from taxable income trice. Super-accelerated depreciation - acquisition
15
price of fixed assets used in the R&D activities can be written-off within two years
Companies partner search in Lithuania
• Enterprise
Lithuania:
http://www.businesslithuania.com/en/EnterpriseLithuaniaCont
acts.html
• Engineering association LINPRA (www.linpra.lt) and companies
database https://linpra.vhspoint.lt/public/CompanySearch.aspx
• Lithuanian Apparel
(www.latia.lt)
and
textile
industry
association
• Lithuanian embassy in Copenhagen (http://dk.mfa.lt/)
• Commercial attaché
16
Conclusion remarks
• Low costs remain one of major key criteria to drive interest for
manufacturing opportunities
• Integration into global value chains for the Baltic region companies
is more likely through closer cooperation in the Nordic region
• Developed transport links and logistic infrastructure become
important as never before
• Companies along with their operations require to move talents and
skilled professionals thus availability of it is vitally important in the
Baltics
• There are undiscovered opportunities to expose benefits by
establishment in the Baltic countries where every country is unique
17
and different
Thank you!
Wages (manufacturing)
Position
Source: UAB "Simplika" ir UAB "CVO
Recruitment
Based on Vilnius estimates, costs in
smaller towns up to 30% lower
Experience
(years)
Monthly salary
(gross, Euro)
From
To
Mechanical Engineer
1-2
597
875
Mechanical Engineer
3-5
716
1105
Mechanical Engineer
5-10
1067
1486
Civil Engineer
1-2
478
835
Civil Engineer
3-5
991
1372
Civil Engineer
5-10
1143
1486
Electrical Engineer
1-2
597
875
Electrical Engineer
3-5
875
1334
Electrical Engineer
5-10
991
1334
Manufacturing Engineer
1-2
538
756
Manufacturing Engineer
3-5
875
1334
Manufacturing Engineer
5-10
1258
1334
Quality Assurance Engineer
1-2
796
1377
Quality Assurance Engineer
3-5
914
1638
5-10
1562
179119
Quality Assurance Engineer
Wages (services)
Position
Net Monthly
Salary (EUR)
Gross Monthly
Salary (EUR)
From
To
From
To
Accountant Clerk
521
811
686
1067
Accountant
869
1303
1143
1715
Chief Accountant
1158
2027
1524
2668
Procurement Specialist
869
1303
1143
1715
Customer Service Specialist
377
724
495
953
HR Specialist
869
1303
1143
1715
IT Team Leader
869
1448
1143
1905
Developer
869
1593
1143
2096
Junior Developer
579
1014
762
1334
Sales Executive/Specialist
724
1303
953
1715
Sales Manager
900
1506
1185
1981
20
Gas
Natural Gas Distribution Service Tariffs:
One-component natural gas distribution service tariffs (according to delivery points)
System
users
group
•The
connection
fee
varies
depending
on
project
parameters;
around 50% of
installment costs
are covered by the
investor
Tariff for distributed natural
Annual natural gas distribution quantity
gas quantity, EUR per thou. m3
per one delivery point (Q)
(VAT excluded)
I
Q ≤ 500 m3)
207.58
II
500 m3 < Q ≤ 20 thousand m3)
67.08
III
20 thousand m3 < Q ≤ 0.1 million m3
64.89
IV
0.1 million m3 < Q ≤ 1 million m3
61.61
V
1 million m3 < Q ≤ 5 million m3
51.55
VI
5 million m3 < Q ≤ 15 million m3
35.90
VII
Q > 15 million m3
14.78
21
Electricity
Medium
voltage
Low
voltage
Power generation price (could vary depending on Supplier)
ct/kWh
15,54
15,54
Transmission fee (ct/kWh)
8,14
8,14
transmission
2,67
2,67
other services
0,74
0,74
public obligation service
4,73
4,73
Average distribution fee
5,32
12,06
Total, ct/kWh without VAT
29,00
35,74
Excise, ct/kWh
0,18
0,18
Total, ct/kWh with VAT (21%)
35,30
43,46
8,39
10,35
Components
Total, EUR ct/kWh without VAT
Nuclear power plant development in Visaginas (East North of Lithuania) is ongoing, more information
on www.vae.lt
22
REGULATORY ENVIRONMENT (1)
In March 2009, the Economic Recovery Plan was adopted by the Lithuanian Government as an economic stimulus package.
In October 2009, the National Agreement was signed by the Government and social partners in order to overcome rapidly
recession and restore the competitiveness of the Lithuanian economy. It aimed to:
In the field of fiscal consolidation:
• reduce public expenditure (salary fund of the Government institutions reduced by 23 per cent, number of civil servants – by
13 per cent)
• optimize tax environment - increase VAT by 2% to 21%, reduce corporate tax to 15%
• balance social security budget (pensions reduced in average by 5 percent, reduce other social benefits (retirement age will
be extended gradually to 65 years, stimulus to work)
• deal current issues with disabilities (more control of evaluating disability and special needs)
In the field of support for business and improvement of business conditions:
• develop flexibly the business environment (EU funds, labour legislation, public procurement)
• labour legislation: overtime from 8 to 20 hours per week; flexible part-time work
• support small and medium businesses (support for starting bussines )
• speed up and simplify the construction permit system, accelerate the modernization of the apartment housing
• increase economic competitiveness through research, innovation and integration of technologies
• restructure the energy sector (electricity market started)
• reduce corruption (improving procurement system, expansion of electronic declaration
23
REGULATORY ENVIRONMENT (2)
• A number of the Structural support schemes are available for individual companies and associations in
the fields of R&D, modernisation of technologies and business management as well as development of HR.
• Reform of science and higher education in Lithuania: engineering industry expects that changes will
effectively support and enhance long-term value added for it, by :
–
–
ensuring quality of specialists to be in line with the market requirements,
ensuring high level of scientific research work and effectiveness of public-private partnership in
R&D field.
• 5 Integrated Science, Studies and Business Centres (Valleys) are being set up in Lithuania in the form of
clusters of academic and research institutions, Competence and Excellence Centres, Science Technology
parks and Industrial parks.
• 10 National Complex Programmes for development of knowledge-intensive business sub-sectors,
including Engineering and IT are to be launched in 2009.
• The EC award “Regions of Excellence”: in January 2011, Lithuania won the award for successful
implementation of policies, programmes and projects in line with the Europe 2020 strategy. 2 other
winners are Brandenburg (Germany) and Wales (UK).
• “Doing Business 2011”: the World Bank gave the Lithuanian business regulatory environment the 2nd
place among all the new EU Member States: Lithuania came 8th out of all EU countries and 23th in the list
of 183 countries that were investigated.
24