2010 12 14

Klaipeda FEZ Success Factors - facilities and infrastructure

A large part of foreign investment in Lithuania comes through Klaipeda port. That's precisely why the first country's Free Economic Zone was established in Klaipeda in 1996. Klaipeda Free Economic Zone (FEZ) operating since 2002 is highly regarded worldwide and is the most successful project of this kind in Lithuania.

Companies located in Klaipeda FEZ were able to achieve good results despite the global economic downturn. In 2009, Klaipeda Free Economic Zone was awarded with Lithuanian exports Award - a traditional Lithuanian Chamber of Commerce, Industry and Crafts award for business leaders. 15 enterprises operating in Klaipeda FEZ managed to increase the overall export performance by 13 percent within nine months compared to the same period in 2008. Sales revenues reached 248 million Euros and export share amounted to 93 percent in total sales.

Export Award recognized Klaipeda FEZ development project as the most successful and efficient industrial park in Lithuania. The area leads among the Baltic States in investments attraction.

According to P. Vasiliauskas, Chairman of the Board of Klaipeda Free Economic Zone Management Company, the decision to set up a multipurpose zone instead of a specialized proved to be right. More than 20 enterprises were attracted to the site since the beginning of its operations and 16 are still working today.

Enterprises located in Klaipeda FEZ manufacture and export biodiesel, plastics, plastic semi-finished products, metal products, provide logistics and warehousing services, fish processing and other. The site continues to attract investors - an agreement with new investor - HeidelbergCement was signed this summer. "Heidelberg Klaipeda" plans to invest up to 2.8 million Euros in the construction of cement distribution facility.

As P. Vasiliauskas stated, high world ratings indicate the attractive investment environment in Lithuania and Klaipeda. Foreign companies considering investment in Klaipeda FEZ evaluate many aspects and points out many advantages of the city and the site.

Klaipeda FEZ encompasses over 412 hectares of employment land; the area has the essential infrastructure in place and is strategically located. The site attracts those in Western markets planning to move to the East and vice versa. Lately, Klaipeda became particularly interested to businessmen from non-European Union countries.

Klaipeda is a crucial Lithuanian gateway and distribution hub connecting sea, land, and rail routes from East and West.  The closest airport, Palanga International Airport, is located within a 30 minute drive. The greatest port advantages are the short distances connecting the port with the most important industrial regions of the eastern hinterland (Russia, Belarus, Ukraine etc.). The main shipping lines to the ports of Western Europe, South-East Asia and the continent of America pass through Klaipeda port.

Tax incentives provided by Klaipeda FEZ contribute to the development of competitive environment. Internationally experienced FEZ management team guides and supports new investors to be ready to start operating in the shortest possible period of time.
According to E. Kiudulas, head of Klaipeda FEZ Management Company, the zone welcomes both large and small, and, narrowly-focused or specific projects since the company has prepared all the necessary infrastructure, lease production and storage facilities, can build for an investor a building he needs and manage the project from the beginning to the "turn of the key".

The tax advantages and Klaipeda FEZ organizational skills compared to other free economic zones were the key factors why "Albright International" chose to invest in Klaipeda.

"We wanted to start the production in Eastern Europe due to more convenient logistics. This is the main reason why Lithuania was chosen. We also noticed Lithuanian willingness to help and Lithuania Development Agency made a significant effort for us. So far it has been a good business experience and after one-year successful performance period we are looking forward for even better 2011", -says company CEO Kevin Holland.

James Andrew Clarke, CEO of BNTP Group dealing with real-estate development and investment, points out that foreign investors pay attention to the fact that Lithuania can compete with countries such as China in terms of production potential.

"For production companies it is not only due to the reduced labour costs. Direct labour cost can be only 10-20% of the total cost of a product. Some people forget that. But the other costs is the rent of premises, administration costs, management costs, utilities costs, raw material costs, transport costs, etc.", - says James A. Clarke adding that China is two months away from the Lithuanian market.

According to him, the additional value to the certain product can be added by shipping products and component materials from China and assembling / processing them in Klaipeda and later re-distributing to Europe.

O. P. Mishra, general director of one of the largest exporters located in Klaipeda FEZ - Orion Global PET, states skilled and qualified people as one of the greatest Klaipeda advantages. "There is no dearth of skilled personnel. Experience is available only in the industry that is working here but even a new industry could flourish with suitable trainings and exposure to the staff who are quick in grasp and well qualified", with no doubts states O. P. Mishra.

In fact, Klaipeda FEZ was established under relatively small investment compared to the global practice and other Lithuania industrial parks. About 67 thousands dollars per hectare were invested by the state whereas worldwide investment into business parks varies between half to a million euros per hectare.

State and EU investment in Klaipeda FEZ in the previous year amounted to 6.6 million euros. There have been years when enterprises located in the site paid over 11-12 million euros personal income and social insurance taxes to the state budget.

Investors are attracted not only by tax incentives. Such factors as infrastructure, favorable conditions for convenient and quick business development as well as qualified and stable workforce are as much important. The success of Klaipeda FEZ lies in the merge of all those factors.