First Billion: Kaunas FEZ enters nine-zero zone
Since attracting its first investor in 2005, the Kaunas Free Economic Zone (FEZ) has had a number of significant achievements in its history – from attracting one of the largest foreign investments in Lithuania to more than 6.2 thousand new jobs created by businesses operating in the territory of the FEZ. To add to this list of achievements: entering the zone of nine zeros – investments attracted by Kaunas FEZ exceeded a billion euros.
“The Kaunas FEZ is a dynamic project that develops as a result of both internal and external factors. New infrastructure is constantly being installed in and around the territory, from the construction of new streets to the construction of viaducts to control traffic flows; the legislative framework and the application of tax incentives are being improved. A favourable investment environment for the implementation of new projects is created by the growth processes of the Kaunas region and the resources of talents, much needed for business. The first billion euros in investments generated by customers mark not only the contribution of the management company to the creation of a business environment for rapid establishment, but also the essential and timely potential of the Kaunas region,” noted Vytautas Petružis, Director of the Kaunas FEZ Management Company. He also stresses that investments are not just a number: they bring people back, protect against brain drain, and, as the experiences and examples of companies operating in the Kaunas FEZ show, investments multiply and convert into even larger numbers – the amount of investments attracted by Kaunas FEZ is increased not only by new investors coming, but also by existing ones expanding their activities.
Currently, 44 investors have rented about 155 hectares of the Kaunas FEZ territory, employing more than 6 thousand people in manufacturing and service companies, and since 2007, when the first employees started to work in Kaunas FEZ, over €131 million in employment taxes have been generated.
Sustainable enterprises, both local and foreign, set up here. The latter generate for the Kaunas FEZ 67% of FDI, which leads to the arrival of modern technologies several times faster than the Lithuanian average. According to Mr Petružis, the Republic of Lithuania, the European Union, and the municipalities of Kaunas district and Kaunas city have invested around €23 million in the Kaunas FEZ, and the profitability of this project for the state is already 5.6 times higher.
“Lithuania can compete effectively with other foreign countries in attracting significant foreign capital projects by having a place ready for investment. Foreign direct investment in the Kaunas FEZ is several times higher than the Lithuanian average, while the total ten-digit amount of investments attracted shows Lithuania’s real attractiveness for this type of project. At the same time, this is also an achievement for the whole region of Kaunas – foreign investors create highly qualified jobs, contribute to technological development and successful industrial expansion,” noted Vida Staskonienė, Director of the Business Development Department of Invest Lithuania.
“The one billion in investment attracted by the Kaunas FEZ is a truly extraordinary event that demonstrates the huge potential of our country’s economy. All investments are essential for our economy, not only contributing to the creation of new well-paid jobs, but also strategically increasing technological breakthroughs, the country’s visibility, and global competitiveness. We aim to create favourable conditions for investors to settle and expand in Lithuania – this requires a long-term and sustainable state strategy that ensures favourable conditions for investment, high qualification of employees, and adequate infrastructure,” said Aušrinė Armonaitė, Minister of Economy and Innovation.
From first founders – to local ambassadors
In 2007, one of the first “settlers” in the territory of the Kaunas FEZ was the Lithuanian-capital innovation and production company Elinta. However, at that time their new building actually seemed too spacious: the Elinta group of companies had only three companies and 60 employees, so part of the building was rented out to other companies. In 14 years, the group grew to seven companies that today employ more than 140 employees and now occupy the entire building.
Recalling the first steps in transferring activities to the then only just-formed territory of the Kaunas FEZ, Vytautas Jokužis, CEO of the Elinta group of companies, admits that although it was somewhat inconvenient to move to a completely empty area of the countryside, attractiveness was both in the right first infrastructure installation steps and the FEZ strategy itself.
“I never doubted that in such a geographically convenient location, near Kaunas and near the main transport lines, was the most suitable place for our company. Moreover, although I had another spot for my company at that time, there was no good way to get there. When I calculated how much it would cost to build a road – I chose the Kaunas FEZ. The main draw here was the knowledge that this place is for industry, so, say, private homes, will never crop up next to our company. In addition, since we were engaged in automation work at that time, I hoped that our services would also be of interest for companies in this area. This was exactly the case: the FEZ companies are now our customers. Calculating the tax benefits received during those 14 years results in a decent amount that I invested in the development of my business. And this means that the benefits allowed us to grow even faster,” said Mr Jokužis.
Plans to focus on growth
With the biggest leaps both in terms of the amount of attracted investments and the number of sub-leased space and new jobs created in the history of Kaunas FEZ, the year 2017 is notable. It was a time when, among other investors, , leading companies in the automotive industry entered the territory – and Lithuania.
One of them is HELLA Lithuania, who, looking back to recent years of operation, first of all note that the decision to settle in the Kaunas FEZ was determined by very clear and specific criteria, all of which were met by this territory: business-friendly higher education institutions that prepare good workers, the supply of skilled workers on the market, adequate infrastructure, attractiveness of the country. and good cooperation with public institutions. “Our future plans focus on growth: HELLA has a successful product portfolio that takes into account major trends in the automotive industry, including electrification and automated control solutions. HELLA Lithuania is interested in continuing its success story in Lithuania. And, we will be happy if our successful activities in Lithuania inspire other investors too. We are especially looking forward to the development of automotive component suppliers in Kaunas – here we see great prospects and opportunities for the future,” said Tobias Pohlschmidt, Managing Director of HELLA Lithuania.
These objectives require, of course, qualified and motivated staff; the demand is especially high for engineers with a technical education and a background in quality and logistics management. The company manages to attract some of the necessary employees to Kaunas from abroad, both by inviting foreigners to work and bringing back Lithuanians from emigration.
No less successfully emigrants are returned to Lithuania by another Kaunas FEZ-based and rapidly growing international health care product manufacturing company, Hollister, which invested about €50 million in its first opened plant. A year ago, the company announced that one in six of their employees had returned from emigration.
“This trend is still going strong. In addition, we always ask our new employees what encouraged them to return to Lithuania and choose to work in our company. Most often these are people who already have work experience in an international company and are looking for employers meeting the same criteria in their home country. So, our company perfectly meets their expectations,” said Shane Caher, former CEO of Hollister Lietuva.
Representatives of the company say that one of the main reasons that led to the decision to settle in Lithuania was that Lithuanian and Hollister’s working cultures are very close: employees value education, are prone to innovation, are able to work together, and implement what they promise.
“Today we can confirm that we were not mistaken,” said the company, operating in the Kaunas FEZ territory since 2019.
Hollister in Kaunas has one of the largest divisions of the company in the world, which in the future could become a centre of excellence.
16 years after the first investor in the Kaunas FEZ, established in 2005, the customer circle has expanded to 44 companies. Although this is just the beginning of the Kaunas FEZ project, the amount of investments of companies operating in this industrial area has exceeded €1 billion. During 2018–2021 alone, the companies operating in this territory created 4,000 jobs and invested over €580 million. Since 2018, the companies operating in the Kaunas FEZ have carried out six development projects with investments amounting to €250 million. A further four projects have been planned in the coming years, which will contribute significantly to the overall indicators of attracted investments and jobs created in the Kaunas FEZ.