Last year, the total taxes paid by more than 40 investors operating in the Klaipėda Free Economic Zone (FEZ) amounted to EUR 107.3 million and reached an all-time record. Purchases of goods and services by FEZ companies in Lithuania also reached an all-time high of more than EUR 500 million.

Last year’s war, as well as the energy, raw materials and inflation crises, and the signs of recession that started to emerge in the second half of the year, distorted the main indicators of Klaipėda FEZ investors. Although the total turnover of companies amounting to EUR 1.76 billion and exports of EUR 780 million are also all-time records, they were significantly affected by the sharp increase in raw material prices related to the pricing of several major investors’ products. Leaving these companies aside, the rest of the Klaipėda FEZ business community has shown moderate growth throughout the past year, but many businesses have faced deteriorating consumer sentiment in the second half of the year.

However, other Klaipėda FEZ business community results continue to show a strong and growing contribution to the regional and national economy. Last year, purchases of goods and services by FEZ investors in Lithuania amounted to EUR 505 million, or 84% more than in 2021. Around one third of this figure is accounted for by the biodiesel producer UAB Mestilla, which buys rapeseed and other raw materials from Lithuanian farmers.

The amount of taxes paid by the Klaipėda FEZ business community also reached an all-time high last year – EUR 107.3 million in social, revenue and VAT taxes were 42% more than in 2021. In comparison, over the past year, the FEZ investors received EUR 8.2 million of state aid, which in the form of taxes alone has paid back several times over.

Last year, existing and new investors in Klaipėda FEZ implemented investment projects worth EUR 45.8 million. The largest investments were made in new REHAU and Finegri factories, while Retal Baltic Films, Neo Group, Orion Global PET, Pack Klaipėda, Lavango Engineering, Glassbel Baltic, Mestilla and other companies invested in the expansion of their existing capacities and infrastructure.

The number of jobs in Klaipėda FEZ investors’ companies increased from 2,300 to 2,800 last year, while the number of employees in the whole FEZ territory was around 5,000 last year.

According to Eimantas Kiudulas, the Klaipėda FEZ CEO, companies in the territory not only demonstrated resilience in a difficult period, but also increased their contribution to the national economy. 

“It is still difficult to talk about large new investments, and the beginning of this year is not easy for business, but we are actively preparing for the expected recovery. A business community that is stable throughout all economic cycles will be one of the factors that will allow us to gain momentum as markets recover,” comments Mr Kiudulas.

Since the inception of Klaipėda FEZ in 2002, Lithuanian and foreign capital companies have invested or plan to invest EUR 778 million in the territory. Since 2011, Klaipėda FEZ investors have paid a total of EUR 591 million in taxes, while the state aid received during this period amounted to EUR 61.3 million.

The Admiral initiative, which brings together 21 partners from 9 EU countries, was officially launched in Espoo, Finland, in May, with the aim of creating a next-generation logistics service platform within 3 years to help reduce the environmental impact of the sector. The project’s Lithuanian partners include the Klaipėda FEZ Management Company.

According to the Admiral team, transport and logistics companies have so far been mainly concerned about their own pollution and energy consumption, but for this reason, less attention has been paid to the indirect environmental impact of the logistics sector. This is precisely the problem that the Admiral initiative will address by developing and promoting sustainable, multimodal, data-driven logistics solutions.

Admiral will focus on a next-generation marketplace platform to manage all supply chains and monitor the environmental impact of each link. The platform will aim to make multimodal logistics chains run more smoothly, make better use of existing capabilities and infrastructure, promote sustainable sourcing and other innovations. At the same time, the Admiral platform will aim to become an innovation hub for software developers who could create and teest new services. Admiral is expected to deliver not only a 20% reduction in the environmental impact of the logistics sector, but also to bring more transparency and resilience to the market.

The Admiral project members in Lithuania will be primarily responsible for generating digital documents and signatures between the different members of the logistics network. The Lithuanian part of the Admiral consortium will also take care of data integration and information dissemination in the logistics sector, and will develop solutions for the automatic calculation and distribution of CO2 footprints.

According to Darius Butvydas, Klaipėda FEZ Client Project Manager, although the transport and logistics sector is digitising, innovation in this business is rather slow and fragmented, the tools used by companies usually do not communicate with each other well, and there is almost no CO2 emissions calculation. The Admiral platform will seek to address all this.

“Klaipėda FEZ is participating in the project as a transport hub, i.e. we will provide our partners with our existing infrastructure (transport monitoring devices, 5G internet, etc.), while the other partner in the project, the logistics company CargoGO, will be testing digital tools in real time. Our data will be used to evaluate the improvements achieved. The pilot project is planned to be up and running within 36 months,” comments Butvydas.

The real outcome of the Admiral project, he says, will be a Europe-wide service ordering platform focused on transport and logistics efficiency and the calculation, assessment and mitigation of environmental impacts. The project will not only provide the ability to measure and understand the CO2 footprint across the entire service chain, but also to actually reduce it.

Admiral’s other project partner in Lithuania, UAB cargoGO Logistics, will provide the project with data and expertise, test solutions, optimise routes, improve driving styles and digitise processes. According to the company’s IT project manager, Lauras Pranckevičius, cargoGO is already testing a separate CO2 emissions calculation and reporting tools, which will enable it to offer customers the least polluting routes and services.

“We could offer customers the most sustainable, environmentally friendly route, with significantly lower CO2 emissions, contributing to a more sustainable future. The project would provide the logistics sector with a system that saves costs, avoids downtime and empty kilometres, and provides a sustainable service. The Admiral project as a whole will contribute to the interoperability of the different logistics chains, thus improving the communication between customer and carrier, to measure and calculate CO2 emissions, and to develop the organisations’ approach to sustainability,” comments Pranckevičius.

A total of 21 organisations from 9 EU countries are participating in the Admiral project. In addition to the Klaipėda FEZ Management Company, the Lithuanian Transport Innovation Association, UAB Cargo Sign, UAB Normalis Tech, CargoGO Group and UAB Trevio have joined the project in Lithuania. The project also includes representatives from business, academia and the public sector from Germany, Portugal, Spain, Italy, Greece, Croatia, Slovenia and Finland. Admiral is funded by the European Union.
For more information on the Admiral project, visit the European Commission’s website and follow its progress on Linkedin.

The latest manufacturing sector report by Invest Lithuania states that even in the face of turbulent global markets in 2022, Lithuania continued to gather recognition for its performance in attracting FDI. Last year, Lithuania was rated 1st in the EU for FDI based on Greenfield FDI performance index, the country retained its 3rd place in Europe for FDI jobs per capita, and the Lithuanian manufacturing sector demonstrated overall resilience and adaptability. Also, almost 70% of companies operating in Lithuania plan to introduce new manufacturing functions or significantly expand existing ones.

Over the past several years, the manufacturing industry experienced multiple shocks, from the Covid-19 pandemic forcing manufacturing plants to suspend operations, to semiconductor shortages that led to certain industry disruptions, to lastly having to adapt to the sharply increased energy prices in continental Europe in the wake of the Russian invasion of Ukraine in February 2022. These shocks had a profound impact on FDI, the survey states.

Lithuania however has managed to maintain a steady third place across all EU members in terms of new jobs created per 1M inhabitants throughout both the pre-pandemic and postpandemic periods, only being surpassed by Slovakia and Hungary. Interestingly, in the midst of the Covid-19 pandemic in 2020, Lithuania created the most jobs per 1M inhabitants in the entire EU (600 FTEs).

Also, Lithuania was the 3rd in Europe in terms of CAPEX investments, experiencing an average 22% increase during pre-pandemic and post-pandemic periods. Lithuania’s CAPEX investments per project increased by 124%, much faster than both in the EU and the CEE. One potential explanation for the decreasing number of workers and increasing capital expenditure investments could be that in the post-pandemic period companies are keener to invest in automatization, resulting in more capital-intensive projects with lower employee requirements.

The Invest Lithuania report also surveyed 62 foreign manufacturing companies operating in Lithuania from a variety of sectors. The survey saw continued evidence of the positive trend of companies pursuing expansion projects. Almost 68% of the companies surveyed are planning to introduce new functions or significantly expand existing ones in 2023-2024, with 66% planning to expand production, 13% engineering, and another 10% R&D functions. Despite concerns over the global economic situation and geopolitics, 23% of the companies are planning to expand two or more of their functions in Lithuania in the following year.

To support this growth, respondents indicated that they are, on average, expecting to hire 46 FTEs within 2023. Again, it’s an increase on the previous year, when companies indicated plans to hire 32 FTEs, on average. During 2023, 77% of the companies are planning to hire new employees. More than a third of the respondents are planning to hire at least 30 FTEs, with eight companies planning to increase their workforce by more than 100 FTEs over the following year.

Lithuania’s talent pool has displayed remarkable adaptability and resilience against such a tumultuous backdrop. In 2022, Lithuania placed third in CEE for attracting and retaining talent. The survey findings also show that voluntary attrition rates at foreign companies remained rather stable at 19%, displaying only a 1% increase compared to the year before. Meanwhile, the overall attrition rate in Lithuania remained at around 30%. This is unsurprising as foreign companies operating in Lithuania have a successful track record of attracting and retaining great talent.

The survey results show that cooperation between foreign investors and local educational institutions remains high, with approximately half of the companies surveyed reporting that they worked together with universities/colleges and/or vocational schools on a regular basis. Not only that, the majority of these companies (67%) chose to cooperate with more than one institution. 

Although cooperation with educational institutions is common in Lithuania, not all foreign companies choose to go down this route. For the majority of those who do not cooperate (40%), the reasoning is quite simple – they do not require it. For others, the rationale is more complex – some companies lack the information needed to take advantage of such partnerships, or it may be that there are no suitable educational institutions to collaborate with.

Regardless of whether a company cooperates with an educational institution or not, the main method of upskilling people was found to be internal training. A staggering 82% of surveyed companies chose to educate people within the organization and are planning to continue doing so in 2023. In general, the survey findings show that 92% of manufacturing companies have some type of employee training. This is not surprising, especially considering that, with the rise of manufacturing 4.0, the workforce is facing an increasing need to strengthen their digital and technical skills.

Klaipėda is listed in the Invest Lithuania study as a city with key competencies in port engineering, metals, plastics and the food industry. Last year, the port city employed almost 29,000 people in manufacturing – a larger proportion than in Kaunas or Vilnius. Unemployment in Klaipėda was 5.9% last year, slightly higher than in Kaunas or Vilnius, but lower than in the other main cities of the country. Also, almost 11,000 students started their studies in Klaipėda at the start of the school year in 2022.
The Invest Lithuania survey also explored areas such as supply chain disruptions and companies’ response, diversity and inclusion, hiring times, non-salary benefits, energy sustainability, CSR and real estate. 

Norwegian company Plus Windows completes the construction of an extension in the Šiauliai Free Economic Zone. It will be an aluminium products department. 

This expansion will allow the company to increase its capacity, better manage inventories, create new jobs and meet growing consumer needs. This year’s turnover is targeted of €9.2 million, as sales in the aluminium sector are expected to increase.

The company has completed the first phase of the construction in 2021. That year, it moved from rented premises in Kuršėnai, Šiauliai District to a new factory of almost 5,000 sqm, which has already been built in the Šiauliai FEZ. Part of the production equipment has been transferred from Norway.

Albright Lietuva UAB, a British-owned manufacturer of electrical switches operating in the Klaipeda FEZ, has completed a EUR 1.5 million expansion project in the specialised production building FlexStart 2. The company has moved its entire soldering activities for electrical contacts to the new premises and established a new stamping department.

Albright Lietuva, which has been operating in its own building in the Klaipeda FEZ since 2007, had been exploring various expansion options for some time but finally decided to expand into the FlexStart 2 project being developed by the FEZ management company.

“We decided to move our contact soldering department to FlexStart 2 because we were very short of storage space in our own building. Soon we had the idea of not only soldering the contacts in the new premises but also producing the blanks for them ourselves. Before, we used to get them from external suppliers. Therefore, this move is both a relocation of activities and an expansion and new functions. All this will ensure a timely supply of contacts for the production of switches and reduce logistics costs,” comments Ramūnas Barcevičius, Managing Director of Albright Lietuva.

The company started the expansion project in the FlexStart 2 building in September and completed it earlier this year. According to the CEO of Albright Lietuva, the decision to move into this building was not only due to the neighbourhood but also the possibility of adapting the premises to individual needs. The new premises are already home to 25 colleagues, with the possibility of growing to 30 later.

The company has rented 1,000 sqm of space and operates under the same roof as Retal Baltic Films and other companies. FlexStart 2 has a total area of 8,500 sq m. The first flexible production building FlexStart, developed by the FEZ management company back in 2017-18, was immediately fully leased and was awarded the Financial Times group’s award for quick investor launch.

According to Eimantas Kiudulas, the CEO of Klaipeda FEZ, this is the second move by an existing FEZ investor into FlexStart buildings in a few months. Recently, UAB Retal Baltic Films, a PET packaging manufacturer, also announced its expansion in FlexStart 2.

According to preliminary data, Albright Lietuva’s turnover in 2022 was EUR 25 million, 19% higher than the previous year. The company expects a 14% growth this year, but the difficult global business environment is still complicating its forecasts and plans.