• Foreign Investment in Lithuania
• Top Foreign Investors in Lithuania (as of January 2002)
• Lithuania's Foreign Trade
• Free Economic Zones

Over the past few years, Lithuania has become a leading location for foreign investors and a competitive centre for product sourcing in the region. The main reasons: a high-skilled, low cost alternative to production in the West, as well as a stable and strong production springboard to the huge markets to the East. Added to this, impressive economic growth, huge increases in foreign investment, a stable currency and a great investment environment make Lithuania the premier location in the Baltic region.

Lithuania began a comprehensive economic reform program following the country's declaration of independence in 1990.

The first fundamental reforms included the formation of an independent system of government revenues and expenditures, the establishment of the Lithuanian Central Bank, price liberalisation, and mass privatisation. Between 1992 and 1993, Lithuania introduced its own national currency, created a capital market infrastructure and a private banking sector. Local government and taxation reforms are continuing.

Consecutive Lithuanian governments have worked to establish the legal, institutional and regulatory framework of an independent, democratic state, and have shown a solid commitment to a market economy. The result - Lithuania has succeeded in developing a business-friendly and opportunity-filled economy geared towards sustained, long-term growth.

• Current infrastructure privatisation is set to speed-up overall economic growth as well as further increase foreign direct investment flows.
• Lithuania's financial infrastructure, including the country's securities sector, banking system, and insurance sector, has developed rapidly since the re-establishment of independence.
• Lithuanian market reforms are coordinated with the IMF and the World Bank - of which Lithuania is a full member.
• When independence was re-established in 1990-1991, Lithuania's foreign trade was nearly 100% with the Soviet Union. In a relatively short period of time, the country's foreign trade with the West reached 81%, of which exports to the EU represent 48%. CIS remains an important trading partner with 19% of exports.

The Lithuanian Development Agency conducts annual surveys on the foreign investment climate in Lithuania. 50% of the respondents have invested in other CEE countries. Their opinion of Lithuania's conditions is that they are similar to other CEE markets. The government's efforts during 2000 in managing Lithuania's economy were evaluated as satisfactory. 94% of investors would invest again, up from 80% in 1997. The main reasons why the companies decided to invest in Lithuania were market potential (good location for business with eastern markets), and qualified and competitively priced labour. Political stability and a good transportation infrastructure were mentioned as additional advantages.

Siemens, Philips, Motorola, IBM, Marzotto Group, Masterfoods/Mars, Kraft Jacobs Suchard, Lancaster Steel, Partek, Kemira, McDonald's, Telia, Sonera, Philip Morris and Wilhelm Becker are among the multinationals that have chosen to locate production facilities and invest in Lithuania. Cumulative FDI reached USD 2.7 billion in 2001.

The biggest single investment came from the privatisation of Lithuanian Telecom through an acquisition of a 63% equity stake by Amber Teleholdings AS (a consortium of Telia of Sweden and Sonera of Finland) for USD 510 million and a commitment to invest another USD 210 million.

Foreign Investment Guarantees

Bilateral agreements on the promotion and protection of investments are already in place with Austria, the Czech Republic, Spain, Italy, Denmark, Greece, Germany, Estonia, Israel, Kazakhstan, China, South Korea, Latvia, Poland, the Netherlands, Norway, France, Romania, Finland, Sweden, Switzerland, Turkey, UK, the Ukraine, Venezuela, Slovenia, Argentina, USA, Australia, Belarus and Belgium-Luxembourg Economic Union. The Agreement on use of Local Currency and the Agreement on Legal Protection for Guaranteed Foreign Investments between the Multilateral Investment Guarantee Agency (MIGA) and Lithuania are in force. Bilateral investment protection agreements with Kuwait, Moldova, Portugal, Russia, Uzbekistan, Hungary and Vietnam have been signed but not entered into force.

Repatriation of profits derived from currency earnings (in both foreign and local currency) is not restricted. There are guaranteed rights to withdraw profits, royalties, and interest in convertible currencies.

Property is protected from expropriation - it can only be expropriated in extraordinary circumstances with prompt compensation at market value in convertible currency.


Foreign Investment in Lithuania

Source: Lithuanian Department of Statistics, 2002
* LDA info (including full cost of Telecom acquisition)

Source: Lithuanian Department of Statistics, 2002
* LDA info (including full cost of Telecom acquisition)

Largest Cumulative Investments by Sector as of January 2002*

Sector Total (million USD) % of total Communications services* 743 27.9% Manufacturing 682 25.6% Wholesale and retail trade 545 20.4% Other 695 26.1%

* LDA info (Including full cost of Telecom acquisition)
Source: Lithuanian Department of Statistics, 2002


Top Foreign Investors in Lithuania (as of January 2002)

INVESTOR ORIGIN JV/ INVESTMENT INDUSTRY SECTOR USD mill. 1. Amber Teleholdings Consortium (Telia/Sonera) Sweden/ Finland Lietuvos Telekomas Telecommunications 510.0 comm. 210.0 2. SEB-Skandinaviska Enskilda Banken AB Sweden Vilniaus Bankas Banking 166.0 3. Williams International USA Mažeikių Nafta Oil Refinery, Pipelines, Sea Terminal 150.0 comm. 75.0 4. TDC (Tele Danmark A/S) Denmark Bitė GSM Telecommunications 130.0 5. Philip Morris International USA Philip Morris Lietuva Tobacco Products 72.5 6. Carlsberg Breweries A/S; Baltic Beverages Holding Sweden/ Finland/ Denmark Švyturys and Utena Brewery 67.1 7. Den Norske Stats Oljeselskap Norway Lietuva Statoil Petroleum Products 52.5 8. Hansapank AS Estonia Hansabankas, LTB Banking 50.8 comm. 37.5 9. Vattenfall A Sweden Lietuvos Energija Energy Production and Supply 49.3 10. DFDS Tor Line A/S Denmark Lithuanian Shipping Company Sea Transport 47.6 comm. 60.0 11. Hansapank AS Estonia LTB Banking 37.5 comm. 37.5 12. Bryggerigruppen (The Danish Brewery Group) Denmark Kalnapilis Brewery 33.8 13. Dansico Sugar AS Denmark Sugar Factories Sugar Production 33.8 14. Amber Mobile Teleholding AB; Motorola; Private Persons Sweden/ Finland/ USA Omnitel Telecommunications 33.0 15. The Coca-Cola Company USA The Coca-Cola Bottlers Lietuva Soft Drinks 31.5 16. Kraft Foods International USA Kraft Foods Lietuva Confectionary & Snacks 31.0 17. Tele 2 AB Sweden Tele 2 Telecommunications 30.0 18. Mars Inc. USA Masterfoods Lietuva Pet Food 27.0 19. Codan Insurance Ltd., AS Denmark Lietuvos Draudimas Insurance 27.0 20. AS Hansa Liising Estonia Hanza Lizingas Financial Services 25.6 21. Euro Oil Invest S.A. Luxembourg Lukoil Baltija Petroleum Products 25.4 22. Neste OY Finland Neste Lietuva Petroleum Products 25.0 23. Siemens Yazaki Wiring Technologies GmbH Germany/ Japan Baltijos Automobilių Technika Electronics 21.6 23. Shell Overseas Holdings Limited Great Britain / Netherlands Shell Lietuva Petroleum Products 20.1 24. Partek Insulation; Finnfund; NEFCO Sweden/ Finland Partek Paroc Construction Materials 19.8 25. Farimex S.A., Profilo Holdings Switzerland/ Turkey Ekranas Electronics 18.4 26. Odense Steel Shipyard Ltd Denmark Baltijos Laivų Statykla Ship Building 18.1 27. Baltic Fund One LT USA Baltic Fund Securities Financial intermediation 18.0 28. NORD / LB (Norddeutsche Landesbank Girozentrale) Germany LŽŪB Banking 17.8 comm. 16.3 29. Osman Trading AB; Woodison Trading AB; Ferrous Investment Ltd.; Duboil Ltd. Sweden/ Ireland/ Great Britain Klaipėdos Nafta Oil Terminal 16.8 30. Tuch Fabrik Wilhelm Becker Germany Eurotextil Textiles 15.0 31. Svenska Petroleum Exploration AB Sweden Genčių Nafta Oil Extraction 14.4 32. Cargill, Inc. USA Lifosa Fertilisers 14.3 33. AGA AB Sweden AGA Trade in Gas 13.2 34. Marzotto s.p.a. Italy Liteksas Textiles 11.0 35. Petrol Holding A.S. Norway Pemco Kuras Oil lubricants 11.0 36. Danish Brewery Group Denmark Vilniaus Tauras Brewery 10.0

Source: informal LDA Survey, 2002


Lithuania's Foreign Trade

• Lithuanian industrial goods have free access to the EU market. Lithuania's free trade agreement with the EU came into effect on 1 January 1995. This agreement was incorporated into Lithuania's Association Agreement with the EU, which came into force on 1 February 1998. In 2001, a two-way free trade zone between the contracting parties was established. Limitations on agricultural and textile goods are still in place.
• Taking advantage of this, Lithuania's exports to the EU have doubled since 1993 and now represent 48% of total exports (as of 1 January, 2002).
• Total Lithuanian foreign trade turnover is growing rapidly: in 2001, as compared to 1996, Lithuanian exports increased by 36.6% (USD 1.13 billion) and import volumes increased by 37.8% (USD 1.72 billion).

Source: Department of Statistics

• Bilateral free trade agreements are also in effect with EFTA countries, Poland, the Czech Republic, Slovakia, Slovenia, Turkey, Hungary, Bulgaria, the Ukraine, Estonia and Latvia. The U.S., Canada and Australia have granted Lithuania trade preferences under their Generalized System of Preferences (GSP) schemes. Free trade agreements with Belarus, Romania, Kazakhstan and Island are concluded but not yet in force.
• Lithuania's main exports in 2001 were: mineral products (USD 1.1 billion or 23.6% of total exports); textiles (USD 746.3 million or 16.3% of total exports); machinery and equipment (USD 488.6 million or 10.7% of total exports); chemical products (USD 293.8 million or 6.4% of total exports).
• Lithuania's main imports in 2001 were: mineral products (USD 1.35 billion or 21.4% of total imports); machinery and equipment (USD 1.1 billion or 16.9% of total imports); chemical products (USD 584.5 million or 9.3% of total imports); textiles (USD 553.5 million or 8.8% of total imports).
• In 2001, Lithuania's largest trading partners were the UK, Russia, Germany, Latvia, Poland and Italy.
• Import and export operations, except for several classifications of goods, such as oil and alcohol, do not require licences in Lithuania.

Free Economic Zones

Lithuania is continuing to enhance its appeal to foreign investors through the development of a network of Free Economic Zones (FEZs) set up at key transport and industrial centres in Klaipėda and Kaunas, which were chosen for their superb blend of modern infrastructure, well-developed industrial bases, and their experienced labour forces.

In June of 1995, Lithuania's Parliament adopted the Law on the Establishment of Free Economic Zones. Lithuanian and foreign companies, corporations, and associations are eligible to participate in the Free Economic Zones.

FEZ Incentives include:

• Corporate tax incentive:
  a corporate tax holiday for the first 5 years and
  a 50% tax reduction for the following 10 years
• No customs duties
• No VAT and excise taxes
• No road taxes
• No real estate taxes
• No foreign exchange restrictions
• Withholding tax exemptions for repatriated profits and dividends
• Streamlined and simplified customs and administrative procedures
• Special write-offs for investments and other expenses on long term assets and new technologies

• A superb strategic location at the crossroads between East and West
• A well-developed and integrated transport system including roads, rail links, airports, and ports
• A skilled, motivated, cost effective, and adaptable work force
• Attractive financial incentives for businesses locating in the FEZ
• Top quality sites and pre-built office, warehouse and manufacturing space
• A wide choice of construction and design services

Territory and location: 205 ha (507 acres) located close to the city centre and port facilities.

Key Sectors of Activities:

• Light industry
• Warehousing and transshipments
• Commercial activities

Reconstruction of the port is under way in order to meet the increasing demand for freight transshipments. Regular cargo, passenger and Ro-Ro ferries connect Lithuania with Germany, Sweden, and Denmark. The construction of a modern cargo terminal was completed in the year 2000 and the port is able to handle all types of cargo. In 2001, 17 million tons of cargo were handled.

Kaunas FEZ

Territory and Location: the Kaunas FEZ is one of the Baltic region's prime, large scale green-field investment sites. The newest of Lithuania's zones, it is slated to occupy 1,054 ha (2,604 acres) of land between the city of Kaunas and Kaunas Airport next to highways A1 and A6 and near the intersection of two major railways.

Key Sectors of Activities:

• Export production
• Transport terminal - a cargo distribution and warehouse centre
• Offshore activities and banking
• Adjacent Science and Technology Park