Lithuanian Business Environment Overview 2016

LET’S TALK LITHUANIA.

February | 2016

WE SPEAK FLUENT BUSINESS

Population1 2.9 million

Labour Pool1 1.5 million

Capital Vilnius

Official language Lithuanian

Dominant foreign

languages

English, Russian,

German, Polish

Real GDP growth2

3.0% (2014)

1.6% (2015)

2.9% (2016)f

Source 3: Heritage Foundation, Economic Freedom Index, 2016

Source 4: World Bank Doing Business Report, 2016

Source 1: Statistics Lithuania, 2015

Source 2: European Commission, 2016

Facts & Figures

13th freest economy

in the world3

1st

in the EU for ease of starting business4

2

Let’s talk Lithuania

30%

15%

14%

11%

9%

21%

Manufacturing

IT

Shared ServicesCentre

Business Services

Sales, Marketing& Support

Other

FDI PROJECTS’ ACTIVITY BY SHARE OF TOTAL PROJECTS1 | 2010-2015

FDI Projects overview

Source 1: The Financial Times FDI monitoring database and Invest

Lithuania data

3


14%

11%

10%

10%

7%

6%

6%

36%

United States

Sweden

Norway

UK

Denmark

Finland

Germany

Other

TOP INVESTING COUNTRIES BY SHARE OF TOTAL PROJECTS1 | 2010-2015

Life Sciences

32ManufacturingSSC & Business

Services

A

1

PRIORITY SECTORS FOR INVESTMENT

#1 Global SSC & Business Service in Lithuania

Technology & HR Centre

5


Global Operations Centre

Shared Service Centre Shared Service Centre

BPO Centre

BPO Centre

Functions: IT development and support

Headcount: 1,270+

Established in: 2009, Vilnius

Functions: IT, Accounting, Compliance

Headcount: 1,500


Functions: IT and support, F&A, HR operations

Headcount: 600


Functions: F&A services

Headcount: 700 (GBS) and 400 (DGITL)


Functions: Accounting and legal services

Headcount: 270


Functions: IT development and support

Headcount: 460+

Established: 2007, Vilnius

Functions: 24/7 Global Processing Center:

Accounting

Accounts payable

Settlement

Credit & risk

Anti-money laundering

Compliance

IT support

FTE: 1,500

Languages: 34 languages

Est.: 2010, Vilnius

Lithuania:Western Union’s Global Operations Centre

6

#1 Global SSC & Business Service Overview

Source 1: Invest Lithuania, 2016

Source 2: Shared Services and Business Services survey, Invest Lithuania, 2015

Source 3: Verslo Zinios Annual Survey, 2015

Source 4: Offshore, Nearshore, Re-shore?, 2014, JLL

Source 5: Central and Eastern Europe Shared Services and Outsourcing Awards, 2016

7


Over 12,800 professionals employed in 60 SSC/BPOs1

Services provided in over 30 languages2

Over 90% of employees have at least bachelor degree 2

All top 3 most desired employers are SSCs3

Among Top 10 destinations globally for FDI in SSC4

38%

23%

17%

12%

5%

5%

Multifunction

IT

F&A

Call Centre

Analytics

Other

SSC & BPO PRESENCE IN LITHUANIA BY FUNCTION1

Vilnius - best city for setting up

SSC in CEE5

Kaunas - best emerging city for

setting up SSC in CEE5

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

NUMBER OF SSB/BPO IN LITHUANIA1

#2 International Manufacturing Presence in Lithuania

Manufacturing plant

Products: pet food

Headcount: 750

Established: 1993 / Klaipeda region

8


Products: industrial woodworking equipment

Headcount: 40+

Established: 2015/ Vilnius

Products: electrical distribution systems

Headcount: 1,250

Established: 2014 / Panevezys

Products: iso-thermal trucks, trailers and semi-trailers

Headcount: 370+

Established: 1999 / Panevezys

Products: electronic circuit boards

Headcount: 470

Established: 1993 / Kaunas

Products: Tobacco

Headcount: 490

Established: 1993 / Klaipeda

Manufacturing plant

Manufacturing plant

Manufacturing plant

Manufacturing plant

Manufacturing plant

Products: Thermo-insulating panels

Isothermal transportation

equipment: insulated trucks,

trailers and semi-trailers

Employees: 370+

Est.: 1999, Panevezys

Lithuania:Schmitz Cargobull

9

#2 Manufacturing Sector Overview


Source 2: The Financial Times FDI monitoring database, 2015 and

Invest Lithuania data

Source 3: Statistics Lithuania 2014; structure by value of industrial

production; excluding manufacture of coke and petroleum products

Source 4: Statistics Lithuania, 2014; production of Lithuanian origin;

excluding manufacture of coke and petroleum products 10


Turnover of foreign controlled manufacturing

companies doubled since 20091

20% of Lithuania’s GDP is generated by

manufacturing sector1

>67% of all manufacturing production is exported

mainly to4:

#1 Germany

#2 Sweden

#3 Poland

#4 Latvia

#5 United Kingdom

18%

17%

8%

7%

7%

43%

Sweden

Norway

Denmark

Finland

Germany

Other

TOP COUNTRIES INVESTING IN MANUFACTURING 2010-20152

28%

20%

19%

15%

7%

11%

Food, Beverages & Tobacco

Engineering Goods

Furniture, Wood & Paper

Chemicals & Pharmaceuticals

Textiles & Leather

Other

MANUFACTURING STRUCTURE | 20143

#3 International Life Science Presence in Lithuania

Manufacturing

Products: injectable compounds

Headcount: 110

Established: 2011, Kaunas

11


Products: respiratory care products

Headcount: 1,920


Products: medical devices

Headcount: 90


Products: reagents

Headcount: 600


Products: recombinant proteins

Headcount: 210


Products: recombinant proteins

Headcount: 120


Manufacturing

Manufacturing / R&D

Manufacturing / R&D

Manufacturing / R&D

Manufacturing

Activity: creates, produces, and sells products of molecular biology (enzymes primarily)

Employees: 600

Est.: 2010, Vilnius

Lithuania:Thermo FisherScientific

12

#3 Life Sciences Sector Overview


Source 2: Statistics Lithuania and Invest Lithuania’s estimations, 2014

Source 3: Statistics Lithuania, 2014; exports of Lithuanian origin

Over 370 manufacturers in the industry1

Life sciences industry has almost doubled over

2009-2014, reaching EUR 820 m2

26% growth of pharmaceutical and medical

production exports observed over 2010-20143

>70% of all pharmaceutical and medical production

is exported mainly to3:

#1 Germany

#2 United States

#3 United Kingdom

#4 France

#5 Russia

#6 Sweden

#7 Japan

13


37%

29%

15%

8%

11%

Pharmaceuticals &Organic Chemistry

Medical & DentalPractice Activities

Medical & DentalInstruments &

Supplies

Instruments forMeasuring, Testing &

Navigation

Other

STRUCTURE OF LIFE SCIENCE SECTOR | 2014

Business

friendly

environment

4Cost &

quality

combined

32Fast to

connect

infrastructure

Young

competence

& talent

B

1Perfect

living pace

5

LITHUANIA’S QUALITIES

#1 Young competence & talent

Source 1: Eurostat, 2015

Source 2: Eurostat, 2015 (age group 25-64)



Source 5: Ministry of Education and Science, 2015

15

Lithuania’s qualities

1st in the CEE with the highest

ratio of young people1

Ambitious young professionals

#1 in the EU or 93% of our population have higher

or secondary education2

#1 in the CEE for mathematics, science and

technology graduates per capita3

16% of Lithuania’s young professionals specializes

in engineering, manufacturing and construction (x2

EU average)4

50% of all student population study fields applicable

for services industry5

43%

18%

12%

9%

7%

6%

6%

Social sciences, business &law

Engineering, manufacturing &construction

Medical sciences & welfare

Humanities & arts

Science & IT

Education

Other

#1 Young competence & talent

Source 1: Population Census, 2011

Source 2: Europeans and their languages, 2012

Source 3: Ministry of Education and Science, 201516


Language

80% proficiency in English among young

professionals1

50% speak at least 2 foreign languages2

Main languages: English, Russian, German,

Polish, Scandinavian and Romanic languages

STRUCTURE OF STUDENTS AT HIGHER

EDUCATION 2014-20153

#2 Fast to connect infrastructure - communications

Source 1: IMD World Competitiveness Yearbook, 2015

Source 2: Rotten Wifi tests, 2015

Source 3: Fibre to the Home Council, 2015

Source 4: Global Information Technology Report, 2015

Leading connectivity and communications technology in the EU

and globally1

Fastest public Wi-Fi in the world2

#1 in the EU for fibre-to-home and fibre-to-building penetration3

#3 most affordable fixed broadband internet in the EU4

17


in fulfilling business needs for

ICT1

1st globally

#2 Fast to connect infrastructure - logistics

Source 1: World Economic Forum, Global Competitiveness Report, 2015

Source 2: European Commission, 2012

Source 3: www.portofklaipeda.lt

Source 4: Girteka Logistics, 2014. Estimates based on two-driver

shared shift model

1st in the CEE for quality of roads1

Road & Rail:

25,800 truck fleet in Lithuania in comparison with Germany:

308,078, Denmark: 21,038, Sweden: 15,2482

Rail cargo services direct to Russia, Belarus, Latvia, Poland,

Germany, Ukraine and Asia (incl. China)

Air:

4 International Airports, access to major European cities

and Moscow within 2-3 hours flight

Sea:

Klaipeda State ice-free Seaport

14.5 m deep port, handling up to 60 million tons of cargo

annually, the largest port in the Baltic States3

18


4

#3 Cost & quality combined

Source 1: National Statistics Departments, 2014

19

Lithuania’s qualities5 2

26

5 0

63

3 5

27

3 4

51

3 3

02

3 0

43

2 0

97

1 5

40

1 0

05

959

930

858

770

766

677

533

423

AVERAGE GROSS MONTHLY WAGES1 | EUR | 2014

x8

x1

x3

x5

#4 Business friendly environment

Source 1: Ministry of Finance of the Republic of Lithuania

Source 2: Sorainen Tax Card 2014

20


LT LV PL DE SE

Corporate

profit tax0 - 15% 15% 19% < 33% 22%

VAT 21% 21% 23% 19% 25%

Dividends 0-15% 0% 0-19% 0-25% 0-30%

Personal

income

tax15% 23% < 32% < 45% < 57%

Social

security

tax

9%

employee

30.98%

employer

10.5%

employee

23.59%

employer

Total

35%Total

~40%

7%

employee

< 31.42%

employer

#4 Business friendly environment – tax free zones

* Conditions apply

7 Free Economic Zones (FEZ):

0% corporate tax for the first 6 years*

50% discount on corporate tax over the next 10

years*

0% tax on dividends*

0% tax on real estate*

Industrial Parks (IP)

6-12 months delivery of build-to-suit

manufacturing facilities

21


#4 Business friendly environment – financial incentives

Source 1: Invest Lithuania

Source 2: Ministry of Economy of the republic of Lithuania

Source 3: JSC “Investicijų ir verslo garantijos”

Source 4: Lithuanian Labour Exchange

Lithuania’s Government1:

Up to 25% of investment to long-term fixed assets

or job creation

Taxation treaties with 50 countries2

Corporate profit tax incentives for R&D - fully

deductible expenses x32

Investment projects: corporate profit tax can be

reduced up to 50%2

European Union2:

Up to 50% of R&D activities

Up to 50% of employee training

Additional:

Up to 23.3% of youth employment costs3

Up to EUR 600 per month reimbursed for

employment of unemployed4

22


Perfect living pace

Source 1: Mercer's 2015 Cost of Living Ranking, 2015

Source 2: The New York Times, 2011

Easy access to Europe

Regular flights to all major European destinations,

with flight-times of only 2-3 hours.

Cost of living:

According to the Mercer Cost of Living Index 2015,

Vilnius is one of the five least expensive EU

capitals to live in for expatriates.1

Lifestyle:

Vilnius is ranked by the New York Times alongside

Copenhagen, Barcelona and Capetown as a hip

and well managed place to live.2

23


We are a government agency that provides

free investment advice, contacts and data.

Let’s talk if you need someone to:

INFORM you on business costs, labour, tax & legal settings and

other business areas.

CONNECT you to partners and organise your business meetings

in Lithuania.

FACILITATE the set up and launch of your company, access

the government financial support and a range of training schemes.

SUPPORT your investment by lobbying for more business

friendly laws and assisting in one-off problems.

24

Invest Lithuania

A: Jogailos St. 4 / LT-01116

T: +370 5 262 7438

E: [email protected]

www.investlithuania.com

25


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