Investment climate
Investment climate

Of all Baltic countries the Swedes see the best prospects in Lithuania

May 28, 2015

The geopolitical situation encountered in Europe had almost no effect on the plans of Swedish capital companies to invest in the Baltic region. In the opinion of the Swedes, the highest expectations for 2018 are related to Lithuania.

An opinion poll of Swedish companies in Lithuania, Estonia and Latvia shows that Swedes plan to invest in the region in 2015 and to even increase their investments over the next three years.

[quote text=”Our companies continue to rely on the Lithuanian economy and market and see new opportunities. We want to send this message to the Swedish companies which have not yet discovered Lithuania.” name_surname=”Cecilia Ruthström-Ruin” description=”Swedish Ambassador to Lithuania” left=””]

‘The Baltic countries are seen as a favourable region for business expansion, regardless of the geopolitical tension in Europe. A qualified workforce, competitive operating costs, favourable tax systems and geographical proximity to Sweden are only a few of the most appreciated aspects in the Baltic states,’ said Lukas Danielevičius, head of the Swedish Trade and Invest Council in Lithuania–Business Sweden.

According to Mr Danielevičius the Baltic countries are attractive because of the balance between good wages and productivity as well as positive expectations for economic growth. In addition, Lithuania’s attractiveness to Swedish business people is increased by the considerably improved air links.

The survey was initiated and carried out in March and April this year in Business Sweden, the Swedish Embassies in Vilnius, Riga and Tallinn, the law firm SORAINEN, Handelsbanken and the Investment and Development Agency of Latvia (LIAA). The respondents assessed tax systems, legislation, the political environment, the impact of corruption on business, quality of life, profitability of the market, infrastructure, reliability of mass media and other factors in the three Baltic countries. They also pointed out the most important areas which require changes and expressed their expectations for the future.

‘I believe that there is a lot of potential in the economic relationship between Sweden and Lithuania. The Embassy and Business Sweden are attempting to promote further development of this relationship,’ said Cecilia Ruthström-Ruin, the Swedish Ambassador to Lithuania.

According to the ambassador, this survey helps understand how Swedish companies measure the business environment in Lithuania. ‘Our companies continue to rely on the Lithuanian economy and market and see new opportunities. We want to send this message to the Swedish companies which have not yet discovered Lithuania. Managers of the companies that participated in the poll also provided valuable suggestions on how to improve the business environment,’ the ambassador said.

As previously announced, about EUR 107 million were invested in an Ikea store, which is located next to Vilnius airport and which has an area of almost 25,000 m2, and in other commercial projects situated in the vicinity.

Growth in Investment Forecast

Sweden is the first in the list of investors in all three Baltic countries. Foreign Direct Investments (FDI) from Sweden amount to 26.3 % in Lithuania, or EUR 3,175 million. In 2014, FDI from Sweden in Lithuania increased by EUR 243 million.

To the question of whether the geopolitical situation in Europe affected their investment plans in the Baltic countries, 22 % of respondents answered that these events had no effect.

‘The trend of Swedish investments is gratifying. In 2012, 45 % of respondents claimed to have new investment plans and in 2015 the number was 52 %. The intention to invest in the Baltic region in 2018 were positively regarded by 63 % of respondents,’ Mr Danielevičius said.

‘The number of Swedish capital companies has increased in the Baltic countries and in Lithuania.  The process was slower in Lithuania due to the lack of knowledge about the country. I suppose that Lithuania has the most potential of all Baltic countries to increase business exchange and trade with Sweden. The fact that today connections to Lithuania by air is better and that more tourists from Sweden come to Lithuania are two factors which will contribute to the changes,’ forecast Hakana Molin, head of Swedish bank Handelsbanken in Lithuania.

Most optimistic forecasts for Lithuania

[quote text=”You can find employees the easiest in Lithuania out of all Baltic countries. The ratio of wage to productivity is the best here” name_surname=”Lukas Danielevičius” description=”Head of the Swedish Trade and Invest Council in Lithuania” left=””]

Lithuania, Estonia and Latvia were evaluated similarly in many aspects. Managers of Swedish companies who participated in the survey three years ago and this year regarded quality of life and attractiveness to develop business in the Baltic countries equally well. Expectations of the survey participants for 2018 were even more positive. The head of Business Sweden in Lithuania stated the highest expectations for 2018 are linked to Lithuania.

Altogether 86 % of the heads of Swedish companies think that the best place for business in the Baltic region in 2018 will be Lithuania; 79 % of respondents think Estonia will be the best place to develop business in three years with 77 % saying this of Latvia.

As in the previous year, the majority of respondents claimed that they were developing a profitable business in Lithuania, Estonia and Latvia. The fact that they generate good profits or moderate profits in the Baltic countries was supported by 78 % of respondents this year. Three years ago this number was 71 %. A total of 92 % of respondents thought that they would generate profits in the region in 2018.

Trust the System of Dispute Resolution

Assessing the legal system in the Baltic countries, 60 % of respondents thought that laws are respected and abided by in this region. ‘I have noticed considerable changes taking place in the last ten years. The young lawyers we meet show that they want changes in this field. They advise their clients not to play in accordance with the unwritten rules typical in the old system,’ one of the respondents wrote in his/her comment.

A gratifying trend is the increasing trust in the dispute resolution system in the Baltic countries. ‘In recent years, the legal environment in Lithuania and other Baltic states has improved. This is also reflected by the high positions of these countries in the rating of the World Bank and other institutions which measure the goodwill of the legal environment for business and the possibility to expand business. Lithuania has simplified the procedures for the issue of construction permits, reduced formalities for establishing business, and retained a stable tax system with one of the lowest profit tax rates in the European Union,’ Algirdas Pekšys, partner of law firm SORAINEN said.

Managers of Swedish companies hold the view that it is not easy to find employees in the Baltic countries but it is possible.

‘You can find employees the easiest in Lithuania out of all Baltic countries. The ratio of wage to productivity is the best here,’ Mr Danielevičius said. ’Of the respondents, 56 % said that compared with high productivity, wages in Lithuania are still low; 41 % of respondents said that this ratio is optimal.’

In 2012, respondents also mentioned several other factors which make Lithuania, Latvia and Estonia attractive for business – the perfect image of Swedish companies, simplicity in establishing a company, profitability of the market, and excellent infrastructure of mobile connections and telecommunications. In terms of the aforementioned aspects, the three Baltic countries were evaluated even better in 2015 than three years ago.

Foreigners who manage Swedish capital companies in the Baltic countries took part in the survey. Among the participants of the survey, the greatest number were Swedish male nationals aged 40-49 working in the private sector. The respondents represent small, medium-sized and large companies; they mainly operate in the service and manufacturing areas. The survey was conducted by Business Sweden. On 9 May, it was presented to the representatives of big Swedish companies in Stockholm.

 

Read full article in Lithuanian at lzinios.lt

 

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