Lithuania is a country which has attracted most foreign direct investments among the Baltic States in the last few years. The success formula includes favorable strategic location which eases cooperation with both eastern and western counties, largest and most diversified economy among the three Baltic States, and what comes dominant for internationalization – reduced costs for doing business.
Lithuania is one of the fastest developing states in the EU. Only within 10 years (2004-2014) it’s GDP increased by 38%. Since 2012 the country performs a stable growth of about 3.3% per year, which is nearly 30 times more than overall EU average.
Lithuania demonstrates high ratings for ease of starting a business. Just within a year it jumped from 19th place in 2014 to 11th in 2015. The startup time for a new business counts for 3-4 days, involves 4 procedures and costs around 85-100 EUR. Business environment there looks particular attractive when it comes to taxes. Thus, country has tax treaties with 50 major markets including USA, China, Russia, etc. The state offers 0% tax rates for 6 years in special Economic zones and 50% profit tax deduction afterwards (7,5% tax over the next 10 years). Otherwise the normal corporate tax is 15%. Also there is no tax on dividends and real estate. In case the turnover of the foreign company is more than 10 million Euro special support programs can be applied – for the establishment. Besides, a number of EU support programs can be applied as well.
Lithuania attracts foreign direct investments also due to high quality and low labor costs. The country takes 1st place for fastest productivity growth in the EU in 2005-2013. More than 30% of all Lithuanians have a higher education – this is the top in Europe and more than 90% of population speaks at least one foreign language. Labor costs are 4 times lower than EU average, with monthly medium gross salary of approximately 700 EUR (in Vilnius a little higher). Lithuania is very much R&D oriented: not only it provides triple tax reduction for R&D, but also occupies 10th place in the world for R&D personnel per capita. Well developed infrastructure Lithuania has to offer (one of the fastest internet in the world, 3 hours flight to major EU capitals, overall urbanely evenly developed country) alongside with low overhead costs makes it an attractive investment location.
While the number of investment projects decreased in 2014 for other Baltic countries Latvia and Estonia, the number of companies establishing new operations or expanding their businesses in Lithuania increased by 25% over the 1st half of 2014 making the country an absolute regional leader for FDI. The largest share for overall investment volumes is product movement and development, taking 25% of all investment projects. In 2014 the largest growth was identified in the sphere of software design, development and testing projects. Geographically the major investment projects in 2014 were originating from Scandinavia, Great Britain and the USA. Among the sectors worth investing in Lithuania are: Information and communication Technology (ICT), metal and wood processing, machinery and electrical equipment, plastics, furniture. Besides, country has promising opportunities for investors in real estate and construction, business process outsourcing, biotech and lasers.
Talking about Finland for nearly ten years between 2003 and 2014, investments by Finnish companies have generated over 25,000 jobs in the Baltic Countries, according to information from fDi Markets. The joint value of these investments is nearly 4.2 billion Euros with 2 billion invested in Estonia and 1.1 directed both to Latvia and Lithuania. Given figures reflect only new establishments. Among the investors we note generally retail companies (Kesko, SOK), finance and insurance firms, as well as manufacturing industries.