The investment of German manufacturing company “Hella” worth 100 million Euros, 300 new jobs in the USA medical equipment manufacturer “Hollister”, and the same number of jobs in a newly built water meter factory. This is just a small part of the great news, celebrated by Kaunas and all of Lithuania, and in recent years, widely shared by Kaunas FEZ – a free economic zone located near Kaunas city.
Recognized by investors, one of the most successfully working and attracting investments worth almost half billion Euros, Kaunas FEZ perfectly exploits the advantages of Kaunas city and its region and can boast about solid indicators of attracting foreign investors. So this time – a conversation with the head of the company managing Kaunas FEZ, Vytautas Petružis, who stands behind the wheel of this company from the very appearance of the FEZ. 7 facts about Kaunas FEZ: discover and explore!
1. History reaching two decades.
“Although we usually mention that the beginning of Kaunas FEZ was in 2004, when the FEZ management company started its work, but in fact, the establishment of this FEZ dates back to 1998. At that time, the government passed laws that allowed the establishment of the first three FEZs – in Klaipėda, Kaunas and Šiauliai. It is true that later the government decided that Šiauliai FEZ had to be closed, but now there are seven FEZs in Lithuania: the oldest ones in Kaunas and Klaipėda, in Šiauliai with restored FEZ status, also Free Economic Zones of Panevėžys, Kėdainiai, Marijampolė and Naujoji Akmenė.
It can be said that the successful actions of Kaunas and Klaipėda FEZs contributed to the development of such zones, proving that such model of attracting investments is excellently beneficial and contributes to the regional recovery.”
2. The main aim: to attract investments, especially foreign ones.
“FEZ primarily seeks to implement the main goals of the state, one of the them is to attract investments, especially foreign ones, because the latest technology comes with foreign investments. According to our statistics, direct foreign investments in Kaunas FEZ is 70% – this is a great indicator, because at the national level, it only reaches about 20-30%”.
3. In Lithuania, LEZs are created using the principle of the green field.
“What is our FEZ today? Generally speaking: it is an industrial green field area. Why we selected green fields? Some FEZs (for example, in neighbouring Latvia) are created in abandoned industrial areas (the so-called brown field) and in this way they seek to revive such areas. Meanwhile, in Lithuania, the principle of a green field has been chosen: there are modern industrial buildings and a harmonious neighbourhood, this is why the entire territory becomes attractive and creates the impression of modernity. The state provides certain favourable conditions for enterprises located in this territory: for example, it provides infrastructure, physical and bureaucratic preparations, and, of course, provides tax incentives.”
4. The initial principle of Lithuanian FEZ was taken from… China!
“The story old as a few decades tells that a Lithuanian politician was travelling in China and saw the free economic zones of the country and was fascinated by them. Indeed, in the mid-90s, this was a phenomenon that has strongly contributed to the upswing of China which we also can see nowadays. In China, special economic zones were created. They were enclosed as if they were separate states, which could not be accessed by unauthorized people, and which even used their own money.
Since the Restoration of Lithuania’s Independence, Lithuania also required economic stimulus and breakthrough. Chinese FEZs turned out to be an excellent example. This is how the primary laws of FEZ were created and approved.
However, today’s FEZs and their laws no longer remind of the Chinese model. We simply understood that we did not need the same model, on the contrary – it would not work for us. Therefore, we selected the principles which were the most effective for the conditions in Lithuania”.
5. The first client – in 2005.
“The first client moved in Kaunas FEZ in 2005: “YIT Kausta” built warehouses of Scandinavian company “Genesta”. Just a few weeks apart, another investor – the famous Lithuanian high-tech company “Elinta” – has settled down here.
Currently, there are already 29 investors in the FEZ territory, there are almost 60 working companies, the investment attracted by the companies reaches to 490 million Euros. In total, the enterprises operating in Kaunas FEZ create 0.31 percent of Gross Domestic Product – this is an impressive number. And we are talking only about the direct creation of GDP – only companies operating within the FEZ, excluding their purchased services and the multiplier effect (say, ordering construction services, etc.), which would undoubtedly increase that percent of 0.31 a few times.”
6. About 2.5 thousand employees are Kaunas residents.
“Investors in Kaunas FEZ have already created 3.5 thousand jobs. Since 70% of the establishments is direct foreign investments, it means both higher salaries and the Lithuanian average exceeding the technological level. Despite the burden of emigration in Lithuania, Kaunas is still successfully fed by the internal migration – people are moving to this city and its surroundings, therefore, our FEZ investors still do not feel the shortage of labour force. Out of the 3.5 thousand jobs, 2.5 thousand employees are residents of Kaunas city.
7. Investors are attracted by the Kaunas label of “technological city”.
“How does Kaunas FEZ differ from other Lithuanian FEZs? Mostly we are lucky enough to be near a big city, famous for industrial and technological traditions. Kaunas has a label of “technological city”, which undoubtedly attracts investors. Industry-technological experience is what investors need and what they are gladly embracing. When investing, they know that they will find the workforce familiar with the necessary technology, and even if the knowledge of the employee is already outdated, it is much easier for an incoming investor to train and prepare the specialist than a person who has no idea about the specific field.
Universities in Kaunas, especially Kaunas University of Technology, are equally essential. We have universities which prepare technical specialists and this is important for all investors, especially those from the West, who start communicating with universities about the preparation of specialists for specific jobs and looking for staff among young people who are still studying, even without the existing establishment”.