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Investment climate, Foreign media

Deutsche Welle: Era of new investors in Lithuania

December 21, 2015

Large Russian companies engaged in energy and production have almost all left Lithuania. However, they are being replaced by a new generation of investors.

Investment by Russian companies in Lithuania is declining rapidly. However, that does not mean that investors from Russia are completely abandoning the Lithuanian market. According to the experts interviewed by DW, Lithuania continues to be a ‘safe haven’ to which Russian businessmen rush when they need shelter from the current crisis affecting the Russian economy.

‘From the very beginning direct Russian investment has been focused on three sectors of the Lithuanian economy: production, energy and real estate. The capital investment in those sectors accounted for 86% of the total investment from Russia in Lithuania from 2010 to 2015.  However, over the past five years the volumes of capital investment have been declining rapidly’, says Nerijus Černiauskas, an analyst of the Department of Economy of the Bank of Lithuania in his interview with DW.

To support his observations Nerijus Černiauskas quotes some data from the Bank of Lithuania: since the beginning of 2010, direct Russian investment in Lithuania has decreased from EUR 622 million to EUR 201 million in mid-2015. This represents a decline from 1.6 % to 0.6% of domestic GDP. According to Černiauskas, as of today, with some minor exceptions, Russian investors have practically withdrawn from the production and energy sectors of the Lithuanian economy.

Protection of the national economy

Piotr Matenzhek, an energy expert on the Polish portal defence24.pl considers that the withdrawal of large Russian business from Lithuania is related to the fact that the Lithuanian authorities are actively protecting those areas of the national economy in which they anticipate possible influence from the Kremlin. ‘As a rule, Russian companies that wish to expand in foreign markets are to a larger or smaller extent connected to the Kremlin, therefore there are always attempts to control their operations. It is only natural that the Russians do not like that’, says Matenzhek. ‘Besides, Lithuania is actively implementing resolutions of the European Union that seriously affect attempts by Russian companies to create monopolies in the energy sector. First of all, there is the realisation of the EU’s third energy package providing for the liberalisation of the gas market. As a result, Gazprom agreed to sell its block of shares in the Lithuanian gas company Lietuvos Dujos to Vilnius, explained Matenzhek in his interview with DW.

In the opinion of Nerijus Mačiulis, the Chief economist of the Swedish bank Swedbank, which has a very active presence in the Baltic States, to conclude that all Russian capital is withdrawing from Lithuania would not be correct. ‘Major Russian investments  in Lithuania are Lifosa (produces fertilisers –Ed) and a network of fuel stations operated by the Lukoil Baltija concern. Businesses from Russia often invest through off-shore companies, and in such cases it could be fairly difficult to establish the origin of the capital, even for such a serious organisation as the Bank of Lithuania’, Mačiulis told DW.

According to Mr Mačiulis , the Russian economy is experiencing hard times at the moment, caused by the sanctions and the falling prices of oil and gas on the global market. Thus, Russian capital will most probably be looking for a ‘safe haven’ in other countries, including Lithuania.

New generation of investors

And while large business is withdrawing from Lithuania, some IT companies from Russia are investing here. ‘Our organisation helps investors set up business in Lithuania. From 2010 to 2015 in cooperation with Russian companies we realised thirteen investment projects, including eleven over the last three years’, Justinas Pagirys, Business Development Director at Investuok Lietuvoje (Invest Lithuania –Ed) told DW.

According to Pagirys, some computer game development companies have recently entered the Lithuanian market eagerly. A number of other companies, such as Charlie Oscar, Alternative Platform and Game Insight have offices here. In the opinion of Pagirys, one company worth mentioning of the Russian companies that have recently invested in Lithuania is Ani Plast – one of the largest producers of parts for sanitary equipment.  In late October 2015, the company opened a plant in the Klaipėda Free Economic Zone, with an investment of no less than EUR 6 million.

Source: Deutsche Welle

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