A record year for Lithuania’s Free Economic Zones
Although the business associations of Lithuania, like those of every other country, are functioning in an uncertain geopolitical situation, the Free Economic Zones have continued to show excellent results, attracting new investors and smoothly carrying out infrastructure development projects. Turnover of the companies managing the Free Economic Zones has not just returned to pre-pandemic levels, but actually exceeded those levels, and in the near future the FEZ management companies expect to see even greater interest among Lithuanian and foreign companies.
One of the latest trends in FEZ operations is a rapid increase in the establishment of Lithuanian-capital companies at the FEZ. Lina Mockutė, the president of the Lithuania Association of Free Economic Zones (LAFEZ), explains that “several years ago, it was not unusual for the public in general and businesspeople in particular to think that the FEZ were intended more to attract foreign investment, but that opinion is now rapidly changing.” The FEZ continues to attract foreign investors, but more and more Lithuania-based companies are taking a closer look at the FEZ. VMG Grupė is already operating at the Akmenė FEZ. UAB Elastas, providing services and components to companies in the furniture industry, is in the process of establishing operations at the Panevėžys FEZ. Brolis Timber, along with property developers SIRIN, EIKA and Rees, are at the Kaunas FEZ. Vilmers is at the Šiauliai FEZ. And others continue to establish operations at Lithuania’s FEZ.
Even as Lithuanian-capital companies show greater interest in establishing operations at the FEZ, foreign direct investment undoubtedly remains important. Thanks to close cooperation among state and municipal institutions, the FEZ management companies and Invest Lithuania, world-class companies including Continental Automotive Lithuania, Hella and others have established operations in Lithuania. At the FEZ, new jobs are created, projects are brought to life, and all of this contributes to faster growth in Lithuania’s GDP. Companies at the FEZ position themselves as companies creating high added-value, contributing to Lithuania’s economic growth, so even greater cooperation between state institutions and the FEZ would accelerate the process of attracting new investors.
In 2021, the companies operating at the FEZ produced record results; just at the Klaipėda FEZ, the 44 companies with investor status achieved a total turnover of 1.22 billion euro. The total export of companies at the Klaipėda FEZ amounted 594 million euro last year, a year-over-year increase of 24%, amounting to 1.7% of Lithuania’s total export volume. Although much of the jump in last year’s numbers can be explained by post-pandemic imbalances in supply and demand, as well as increasing prices for raw materials, nevertheless practically all of the companies operating at the FEZ demonstrated growth of some kind.
In 2021, the Kaunas FEZ attracted an additional 233 million euro in direct investment, and the companies deciding to establish operations there plan to create an additional 1,600 jobs, along with the existing or already-planned 6,200 jobs. In 2021-2022, more than 50 hectares were sublet to greenfield investors, among them Press Glass, Omniva and Eika Asset Management, in the facilities of which the German pharmaceutical distributor Tamro Baltics will establish its operations.
LAFEZ president Lina Mockutė, also serving as director of the Akmenė FEZ, emphasises the significance of Lithuanian-capital investments. Since 2019, the Akmenė FEZ has attracted more than 250 million euro of investments; this year, the new VMG Akmenės baldai factory will open its doors, creating several hundred new jobs as well as starting the development of a new project for a construction-lumber factory. In 2021, investments to improve transportation and engineering infrastructure related to the Akmenė FEZ exceeded 7 million euro.
Development of the Šiauliai FEZ has accelerated due to synergies with partners and the municipal government, improving nearby infrastructure as well as the FEZ infrastructure itself. Šiauliai has become a centre for attracting investments into the future, because the railway terminal has received investment, the airport has been upgraded, ring roads have been planned, and all of this is integrated into the FEZ. The project for the DPD logistics centre, executed together with the builders BSP, has successfully begun; an impressive 40,000 m2 factory for Vilmers has been planned, and construction works have already begun.
PonBike is establishing operations at the Kėdainiai FEZ, where the company will build a bicycle-assembly factory in an area of 12.7 hectares. Due to the changing geopolitical situation, development of certain projects has paused or slowed. Due to increasingly strained relations between Europe and the USA, on the one hand, and China, on the other, as well as increased logistical expenses and longer delivery times, an opportunity has opened for multinational companies to relocate manufacturing projects from China to Europe, where Lithuania’s potential can be put to good use.
At present, the Marijampolė FEZ has leased 87% of its area to investors. New investors have the opportunity to establish operations in an area of almost 10 hectares with engineering and other infrastructure, along with the ability to develop railway access, improving accessibility for companies locating operations there. The Marijampolė FEZ has designed and is preparing another set of plots in an industrial area of more than 12 hectares. In addition, it is planned to broaden the spectrum of real estate services available to Marijampolė’s and regional investors, with standardised production facilities available for lease by mid-size and smaller investors.
In 2021, the turnover of companies operating at the Panevėžys FEZ increased year-over-year by 32%, and profit increased 58%. The last several years at the Panevėžys FEZ have been especially successful, because several companies have planned investment there. Construction of the AQ Wiring Systems factory was completed. The expansion of the Ekornes Lithuania production and distribution centre is being completed. Construction of the modern bakery AR maistas is proceeding. In the near future, development of Arginta Engineering is being planned, and Gedsta NT will begin construction of a rental building.
In 2021, Lithuania’s Free Economic Zones operated successfully, attracting prominent foreign investors. The opportunity to quickly establish operations at the FEZ continues to accelerate the process of attracting companies. Summarising the current FEZ situation, LAFEZ president Lina Mockutė emphasises that it would be a good idea for the national government, in seeking to attract investors, to focus not just on Vilnius, but on Lithuania’s other regions, because that can provide business with effective “green” corridors (rapid establishment of operations) and a more loyal workforce, and can improve conditions for employees. The fundamental advantage of the business organisations operating at the FEZ remains the skill, competence and efficiency of the people there, on which the sustainable development of the country’s economy and the continuing reduction of social inequality depends. Only by working together with national and municipal institutions can even more impressive results be achieved.