Manufacturing in Lithuania. Lina Rudzianskiene Finpro Lithuania August 2008

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Andrea Stokes
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1 Manufacturing in Lithuania Lina Rudzianskiene Finpro Lithuania August 2008

Lithuania Quick facts: - population 3.37 million - area: 65,300 sq km - biggest cities: Vilnius 553,200 Kaunas 373,700 - GDP 28 bn EUR (2007) - inflation 5.7% (2007) - EU 2004 / Euro est. 2011 - avg.

2 Lithuania Quick facts: - population 3.37 million - area: 65,300 sq km - biggest cities: Vilnius 553,200 Kaunas 373,700 - GDP 28 bn EUR (2007) - inflation 5.7% (2007) - EU 2004 / Euro est avg. (gross) salary 594 EUR - social costs for employer 30.98% e 2008f 2009f 2010f Nominal GDP (EUR, bn) Per capita GDP (EUR) 6,990 8,330 10,445 12,611 15,786 Real GDP, yoy (%) Inflation (CPI), yoy, avg. (%) Unemployment rate (%) Current account balance/gdp (%) FDI/GDP (%) Multimodal transport corridors of European significance crossing Lithuania Key Industries: -Machinery & electric equipment manufacture Metal processing & equipment manufacture Real estate & construction Logistics and infrastructure: Basic infrastructure: 4 international airports, ice-free port Lithuania links Russia and CE. Main motorways are in a good condition; highway length 309km 274km of the Via Baltica Route goes through Lithuania 146 mobile subscriptions per 100 inhabitants (2007) 40% of households with internet access (2007) Materials: 52.4 thous. tons of wire of iron or non-alloy steel were produced in 2007; the production of cast iron made up 11.3 thous. Tons. In 2007 the import of iron, steel and their articles was 1 bn EUR. The main and the only cast iron factory in Lithuania is AB Kauno ketaus liejykla. Main companies manufacturing from steel and iron are AB Astra, UAB Alga koncernas ; UAB Auridos komercija manufactures from low alloy steel. 2

3 About Technology Industries The are ~1670 enterprises working in metal manufacturing industry, 1490 of which are SMEs. Output of metal manufacturing enterprises amounted to 2 bn EUR in 2007; out of which production of basic metals 25 MEUR, metal equipment and machinery 343 MEUR, radio, television and communication equipment MEUR, manufacture of fabricated metal products 606 MEUR, manufacture of office machinery and computers 14 MEUR, manufacture of electrical machinery and apparatus n.e.c. 261 MEUR, manufacture of medical, precision and optical instruments, watches and clocks 129 MEUR, manufacture of motor vehicles, trailers and semi-trailers and other transport equipment 395 MEUR. Export of machinery, mechanical appliances, various electrical equipment made 1.6 bn EUR in 2007 being 13% of total export Key export partners: Germany, Russia, Latvia, Poland, Estonia, and the United Kingdom The main export commodities: electrical machinery and mechanical equipment, transport vehicles, various steel manufacture products Metal Processing and Transport (mostly, Automotive) Equipment Manufacture -The sub-sector s output 1.4 bn EUR (2007), 20% growth to compare with companies operate in manufacture of fabricated metal products, 679 of them are SMEs; 187 companies are in manufacture of transport equipment, 47 of them are SMEs. -Profitability of Lithuanian s metal processing industry is on average 6.7% -30% of production is exported -60% of transport (mostly automotive) components produced in Lithuania are exported; the production includes various transport parts of Volkswagen, Volvo, SAAB, Renault, and Yazaki -The main products of metal processing and transport equipment: wire and cable harnesses, fuel pumps, transport electronics, compressors, oil and air filters, brake systems, cargo containers, assembling stock motor vehicles Machinery & Electric Equipment Manufacture -The sub-sector s output 584 MEUR (2007), 4% decrease to compare with of 30 companies in office machinery and equipment manufacture are SMEs; of 414 companies manufacturing machinery, equipment, electrical machinery and apparatus n.e.c. are SMEs. -It comprises research, design and manufacture -70% of production is exported; export grows by 15% annually, and covers 20 European countries -The main branches of the sector: electrical equipment and appliances, radio television and communications equipment, equipment -Production of refrigerators and LCD-screens 3

4 Availability of labour force -2 technical universities (3,100 graduates*), 3 colleges (2,000 graduates*) and 20 vocational schools (4,600 graduates*) in Lithuania -40% labour force with higher education, 20% of tertiary graduates in engineering -Every third Lithuanian speaks English; 8 Lithuanians out of 10 speak Russian -German, Russian and French are usually taught as a second foreign language Note: * - number of graduates in engineering, manufacturing, and processing specializations Recruitment -Number of employment companies: ~100 -Cost:1,000-5,000 EUR -Time: 1-2 months Labor Productivity Value added per hour worked, in EUR 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0,000 5,781 6,354 6,835 7, ,735 Unemployment, 2007 Region % Vilnius 4.4 Kaunas 4.2 Klaipeda 4.1 South (Marijampole, Alytus) North East (Panevezys, Utena) North West (Siauliai, Taurage) Lithuania s average 4.3 4

5 Wages, social costs and taxation Wages, 2007 Social costs & taxation Type Welder CNC programmer Metal worker Labourer Project manager Avg. salary (gross Eur) 868 EUR 1013 EUR 730 EUR 580 EUR 1300 EUR Social cost for employer Type % 30.98% Corporate profit tax 15% Income tax 24% VAT 18% (reduced VAT 5%) Regional differences in salaries, 2006 Vilnius +16% Kaunas -5.6% Klaipeda -1% South (Alytus, Marijampole) -18% North East (Panevezys, Utena) -2% North West (Siauliai, Taurage, Telsiai) -16% Comments Minimum monthly salary 232 EUR Minimum hourly salary 1.40 EUR Average gross monthly salary 594 EUR Salary increase of 19% in 2007 (compared to 2006) due to shortage of labour force and high inflation 5

6 The EU Structural Support, EU Structural Support by Programs 6.6 bn EUR of the EU structural support is allocated for Lithuania for , out of which 3.1 bn EUR for economic growth operational program (including manufacturing sector) 1.7 bn EUR of the EU structural support for Economic growth operational program includes: -Development of technology and scientific researches for increase of competitiveness of economy and economics growth -Increase of business productiveness and creation of favorable surrounding for business Technical assistance, 1.40% Cohesion promotion, 39.08% Human resource development, 13.80% Economic growth; 45,72 % 6

7 FDI in Lithuania Cumulative FDI in Lithuania, bn EUR FDI in Lithuania by Sector, ,3 2,7 3,1 3,8 3,9 4,7 6,9 8,3 10 Real estate, Renting and Business Activities; 8,40 % Transport, Storage and Communication, 12.80% Other; 4,50 % Manufactu ring, 36.30% Major Countries Investors, 2007 Sweden; 11,70 % Germany; 8,60 % Finland; 5,31 % Other; 19,40 % Russia; 9,60 % Poland; 18 % Nether lands, 4.30% Estonia; 5,90 % Latvia; 4,40 % Denmark; 12,90 % Comments Financial Intermediation 17.20% Wholesale and Retail Trade; 11,50 % Electricity, Gas, Water Supply; 9,30 % FDI per capita: 10,300 EUR (2007) FDI into the sector of engineering industries 281 MEUR (2007), out of which: MEUR - manufacture of basic metals and their products 66.1 MEUR- manufacture of machinery and equipment 51.9 MEUR manufacture of office machinery, computers, electrical machinery and apparatus 25.3 MEUR medical, precision and optical instruments, clocks, etc MEUR transport equipment 8.5 MEUR manufacture of radio, television and communication equipment and apparatus 7

8 FDI in manufacturing FDI by economical activity, MEUR 120 Number of foreign companies investing in manufacturing Manufacture of basic metals and their products Manufacture of basic metals and their products Manufacture of machinery and equipment n.e.c. Manufacture of office machinery, computers, electrical machinery and apparatus Manufacture of radio, television and communication equipment and apparatus Manufacture of medical, precision and optical i t t t h d Manufacture of machinery and equipment n.e.c. Manufacture of office machinery, computers, electrical machinery and apparatus Manufacture of radio, television and communication equipment and apparatus 20 Manufacture of medical, precision and optical instruments, watches and clocks Manufacture of transport equipment 8

9 National investment incentives (1) The main nation incentives for investment in Lithuania are Free Economic Zones (FEZ), Industrial Parks (IP), and Science and Technology Parks Free Economic Zones (FEZ) Incentives in Lithuania s Kaunas and Klaipeda FEZ* include: -no corporate tax for the first 6 years and a 50% corporate tax reduction for the next 10 years (applicable for investment exceeding 1 MEUR) -no road and real estate taxes -extensive application of 0% VAT *Total amount of incentives received by a company may not exceed 65% for small enterprises and 50% for medium and large enterprises of investment in the long term assets. Klaipeda FEZ ( -strategically located near the ice-free seaport, airport, motorway, and rail network -combines FEZ incentives with industrial parks and the advantages of logistic centers -all the necessary infrastructure is already installed at the site -investors have a ready access to water, electricity, natural gas, and telecommunication resources Kaunas FEZ ( ) -located in the centre of Lithuania at the intersection of the Via Baltica, the European priority transport corridor, connecting Helsinki, St Petersburg, and Warsaw, and the East-West highway linking the port of Klaipėda with Russia, Belarus, and Ukraine -situated near Kaunas international airport FEZ FEZ 9

10 National investment incentives (2) 2 Industrial parks (IP) -IP are currently being prepared with all necessary physical infrastructure (gas, electricity, etc) -IP are expected to be ready for use until the end of Size of IP range from 8 to 220 ha and will be divided into smaller parcels corresponding to investors needs -Long-term lease of land -Infrastructure will be brought to the investor s plot free of charge Science and Technology Parks (STP) -Situated in the biggest cities Provide comfortable environment for commercializing R&D activities and integrating business, science, and research -Supporting knowledge transfers -Develop favorable infrastructure for the establishment of new innovative businesses in Lithuania and encourage the growth of existing businesses engaged in the development of innovative technologies. 6 STP in Lithuania IP Vilnius STP Visoriai ITP Northtown TP Kaunas High-Tech and IT Park Klaipėda STP Siauliai STP 10

11 Examples of Investors Investors in manufacturing sector: Yazaki Wiring Technologies Lietuva (Japan) cables for cars Wemar Masinos (Switzerland), design, production and sales of cutting, pressing, winding machinery Baltic Zinc Technics, K.T.S. Production (Sweden) metal products and constructions Mechel Nemunas (Russia) metal products (steel wire, nails) Stansefabrikken (Norway), metal processing Schmitz Cargobull Baltic (Germany), trailers, semitrailers, metal processing VAE Legetecha (Austria), steel products for rail sector Peer Industries (Spain), forging products Note: there is no clear regional concentration of manufacturing companies in Lithuania; they are spread all over the country Finnish investors: ~220 Finnish owned companies in Lithuania The main sectors by number of employees: trade and services, construction, food, ICT and media The main sectors by number of companies: construction, trade and services, consultancy, food, and electronics and automation Kuusakoski Oy is the major investor in the metal industry Other important Finnish investors: YIT corporation Machinery Oy Rautakesko Oy Lemminkainen Oy Kone Oyj Alma Media Oy Afectogemimap Group Oy Tietoenator Oy Wavin Oy Kemira-Growhow Oy 11

Investment potential of the Pskov Region

Investment potential of the Pskov Region Pskov region Western gateway to Russia 180000 Pskov, Lenina str., 17. 8 800 250 62 24 airpo@invest.pskov.ru 02 Distinctive features of the Pskov region The effective