Free economic zone near the Lithuanian town of Kėdainiai means tax free zone and opportunity for foreign and including Russian, companies to produce goods labeled as "Made in EU". Minimal investor requirements and other interesting details, the ee24.com learned from Giedrius Valuckas, Director of the operating company of the free economic Kėdainiai zone in Lithuania.
– Property in Estonia and Latvia is breaking all request records on our website, but Lithuania is rather weak and looks as an outsider. Especially, regarding commercial properties and investments in production. Could you, please, tell me, what is your offer?
– We are an operator of free economic zone (FEZ) in Lithuania and are looking for investors, including the ones from Russia, who are interested in the construction of factories and foundation of new production units. We don’t perform only as the Lithuanian company, but in some sense as the whole Lithuania. Because of geographical position, our country has always been and will be in future a kind of tunnel between Russia and Europe and so we try to establish friendly business relations with our eastern neighbor.
– What kind of zone is it and what operations are possible there?
– In Lithuania, there are five FEZs. Companies, including foreign ones, registered on these territories, get tax preferences. This also applies to the business from Russia. Our zone is called Kedainiai FEZ and is located in the heart of Lithuania at the cross of roads and railways. It takes a night on the train, or one and a half hours by plane to reach Moscow (from Vilnius). There are only 50 km to Kaunas and 150 km to Klaipeda port and the capital of Vilnius.
Zone area is 130 hectares. Now, it’s in fact, a ready built site; there are gas, electricity, roads and street lighting is installed. It remains only to build. You can be engaged in production (metal, wood, electronics, and so on), trade or logistics.
– Do you plan own development of plants and its further offering for rent as a commercial property?
– Of course, we could offer the land for development as well as ready-made objects, but it is more logical for investor to come and build as he needs. Construction takes a year and you can get a state support (the Russians can also use this opportunity) in a number of target areas: construction, equipment supply, employee’s training and so on.
– What are the benefits of being an investor, ready to come to this area? Do you have any examples of such cooperation?
– Russian business is interested in our offer. Russian companies are fond of production in Lithuania because it is cheaper and because we have qualified personnel, and in addition, the products get European certificates and automatically become the "Made in EU".
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"Our FEZ allows Russian goods to become the Europeans. And we already have interested investors"
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There are companies that have the capacity and capabilities, but they cannot find a way to the European market: ready to produce they are not able to sell without the European certification. Our FEZ is an opportunity for Russian goods to become the Europeans. We already have real investors. Main area is production of food, which will be sold in the European Union.
You open the Lithuanian company and rent a land plot in the FEZ for a period of 49 years. When forming the share capital of €1 million (that is approx. the cost of plant or other production unit construction) the company is excused from paying an income tax for a period of 6 years and the tax rate for next 10 years is reduced. Also, there are no taxes on dividends and no property tax for 49 years.
– It is all clear with business, but what are the Lithuanian state benefits from creating FEZ?
– State benefits are as follows: the arrival of foreign investors, new jobs creation, retention of the population, development of the territory and foundation of production units. Production sector of Lithuania and of the Baltic States as a whole has not yet been developed, especially if compared with Germany or Sweden. FEZ operator is selected through a tender and the State makes up a plan. For example, in five years we have to attract about 400 people and €20 million investments. We expect to find 2-3 major investors in a three year period, but the process went faster: the first 8 months of work have already brought 2 contracts and another 5 are at the negotiation stage.
– How do the political events and the conflict in Ukraine affect the business? Have you noticed any fall in investor’s activity?
– This makes problems for some ones when for others this only helps. Business does not stand still. There are problems in macroeconomics, but interest in the Kėdainiai FEZ is not lost. Our partners are mainly the Swedes and the Germans ...
– And what about the sanctions? Russia has recently banned the import of products from Western countries.
– As an operator of the FEZ we don’t feel any sanctions because investors have own markets and business plan. If we talk about the situation in Lithuania, nothing has changed dramatically, as there were only few companies in our country that were completely depending from exports to Russia. They had just to shift to other European countries (e.g. to Spain or France), Belarus, Kazakhstan and others. The sanctions, of course, do not help and even deny the possible ways of business development in the EU and the CIS. We try to be businessmen and not politicians. I think such steps lead to destruction of good relationship but not to the economy optimization. We hope that the situation will improve soon.
Interview: Pavel Kuznetsov, ee24.com