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EU Country Focus LITHUANIA: July – December 2013 PRESIDENCY OF THE COUNCIL OF THE EUROPEAN UNION

by Žygimantas Pavilionis, PhD, Ambassador of Lithuania to the United States

Lithuania is a European country that combines what is considered Nordic – orderly, progressive, natural, with what is assumed to be Eastern European – young, assertive, and yet uncharted. The largest of the three Baltic States, sometimes called a Northern, and sometimes an Eastern European country, Lithuania in fact represents an authentic combination of the two. Our country is located on the very crossroads of three huge markets. It is a springboard to the EU  and Scandinavian countries, while the Eastern markets of Russia and the Commonwealth of Independent States (CIS) are on the opposite side of the border. Lithuania is a part of the Baltic Sea Region, and whilst it has always been an active business partner within the region, it is becoming more and more active in its transatlantic business outreach.

2013 is a special year for Lithuania: for the first time, our country will take over the Presidency of the Council of the European Union. Member of the European Union since May 1, 2004, Lithuania assumed the rotating Presidency on July 1, 2013.

Lithuanian_Presidency_of_theEUC

As the European Union moves towards recovery, closer cooperation between the Member States and European institutions – the European Parliament, the Commission, the President of European Council and the High Representative is needed more than ever. In close cooperation with these institutions the Lithuanian Presidency will focus on the three goals of a credible, growing and open Europe. [For more information visit lietuva.lt]

LITHUANIA: ECONOMIC DYNAMISM BORN FROM AN ENTREPRENEURIAL SPIRIT

Invest in Lithuania
With one of the best-educated and multilingual workforces in Europe, an unrivalled communication infrastructure and a high-performance work culture, Lithuania offers a vibrant business environment and a splendid quality of life.

 Making a name for itself
In less than 10 years since Lithuania joined the European Union, this Baltic State has made a name for itself. Emerging from the periphery, Lithuania has become a trendsetter in Europe through its economic achievements, its disciplined and constructive approach to coping with the economic crisis, and its innovative solutions to the key social and political issues of the day.

In its role of the President of the Council of the European Union, Lithuania will be playing host to a continuous stream of European Union officials, politicians, and business leaders, each of whom will discover a country of unfolding possibilities.

Visitors to Vilnius will find much more than its charming Old Town. They will find a vibrant society, built on the people’s entrepreneurial spirit and dynamism, and a leadership committed to providing sound macroeconomic stewardship. They will experience an economy that has regained its footing against the backdrop of continued stagnation throughout Europe. And most importantly, they will witness a country that is open for business, where home-grown talent attracts world-renowned companies like Thermo Fisher Scientific, Barclays and MARS.

What makes Lithuanians tick?
Lithuanians are ambitious, and deeply committed to the success of their nation. Their global perspective is amply demonstrated by their exceptional language skills – the country is ranked among the top five in the EU for foreign language proficiency. More than 90% of Lithuanians speak at least one foreign language – typically English, Russian or Polish – well above the EU average of 54 percent.

Lithuanians are also among the most tech savvy and connected people worldwide. In 2012, the country had four million mobile phone subscribers – one million more than the total population. In addition, more than 90 per cent of all financial operations are performed via e-banking, perhaps because Lithuania was the first EU country to implement mobile signature solutions for online banking. This enthusiasm for information and communication technology has lured a critical mass of young Lithuanians to work and study in the ICT sector.

Roughly 22,000 professionals work in nearly 1,000 IT firms, and more highly-trained experts are in the making, as over 4,500 students are studying IT at 16 universities and colleges. The country ranks first in the EU for its share of individuals aged 16-24 who have obtained IT skills through formal education, and second for its share of advanced IT users. With a tech savvy population and the fastest download and upload speed in the EU (and second fastest worldwide), it’s no surprise that firms with IT needs are flocking to Lithuania.

In 2009, Barclays came to Lithuania to set up a business process outsourcing office starting a trend. Western Union and Scandinavian banks have since followed. Lithuania has now developed into a first-rate shared services cluster, employing over 6,000 employees supporting business processes in nearly thirty languages.

Innovation leads to business success
The European Commission released the Innovation Union Scoreboard for 2013 showing Lithuania with the second highest EU-wide increase in its innovation performance between 2008 and 2012. In this environment, local innovators are flourishing, and an increasing number of tech start-ups are calling Lithuania home. GetJar, the world’s second largest mobile application store with over 2 billion downloads to date, and Pixelmator, one of the most successful App downloads, both have Lithuanian roots. The country is set to become the next great App development hub in Eastern Europe.

Key to investor success: economic expansion and pro-growth policies
In 2012, the Lithuanian economy grew by 3.6% – after nearly 6% growth in 2011. Exports, a key driver of growth, have continued to expand over the past three years, growing by an average of more than 25 percent each year. While the Eurozone core is mired in economic stagnation, Lithuania’s economy is set to expand again by 3% in 2013.

Macroeconomic stability is essential to the country’s goal of gaining admission to the Eurozone in 2015. Even after the global financial crisis, which shook regional markets, commitment to fiscal discipline has allowed the Lithuanian economy to return to growth while providing a stable business climate.

For example, corporate income tax remains low at 15 per cent, in spite of the initial fiscal challenge stemming from the global financial crisis. Lithuania has the fourth lowest corporate tax rate in the EU, well below the EU average of 23.5%, The country also provides investors with numerous tax incentives ranging from a triple tax deduction for R&D investments to extended tax-exemptions in special economic zones.

Beyond providing macroeconomic stability and a business-friendly environment, the country is also making strides in reforming its pro-growth regulatory framework. As the Heritage Foundation reported this year, “The Lithuanian economy has implemented critical reforms in many areas, helping to create and sustain a vibrant private sector that has been growing rapidly.”

Beyond IT: advanced manufacturing from pharmaceuticals to steel processors
The country of three million people also provides a range of critical products, from life-saving pharmaceuticals to automotive parts. The Israeli pharmaceutical giant TEVA uses its Lithuanian subsidiary to produce critical proteins at the company’s only manufacturing facility of the kind in Central Europe. Lithuania’s innovative pharmaceutical researchers also developed the cancer drug TevaGrastim and technology that cuts genes three times faster than previously possible.

The most demanding customers in the automotive, electronics, aerospace and military sectors also rely on Lithuanian manufactured products, from fully assembled electronic circuit boards to specialty designed components. Such range of production is facilitated by the proportion of engineering students per capita (which is in TOP5 of all EU). Niche manufacturing firms like Germany’s Gerhard Kurz Electronics, which manufactures control systems and pressure sensors, and CIE Automotive, which produces components for the automotive industry, have improved their bottom line through Lithuanian investments. 

Talk business now
Some of Lithuania’s foreign investors came to the country to profit from the country’s strategic location at the centre of a borderless Europe. Others came to build on its IT expertise. Still others have conducted medical trials here, to benefit from Lithuania’s cost-effective, educated workforce. In each case, Lithuania has passed the test of live business development with flying colors.

According to a KPMG survey of local and foreign business leaders, both native and international corporations have the same, high level of confidence in the economy’s continued solid performance. A similar report published by the German-Baltic Chamber of Commerce records bullish optimism, noting that 93 percent of German companies would invest in Lithuania again.

As Lithuania takes the helm of the EU Presidency, there is no better time to discover the investment possibilities in this vibrant Baltic nation. Investors will find a confident and entrepreneurial spirit driving the core of a dynamic business environment.

 

THE SECRET OF LITHUANIA: WHY LEADERS OF LIFE SCIENCES INVEST HERE?

Enterprise Lithuania
When Nobel prize winner Prof. Ada Yonath from the Weizmann Institute of Science addressed 800 participants from 30 countries at the first international conference Life Sciences Baltics held last September in Vilnius, the capital of Lithuania, it was like a symbolic return to her roots and at the same time a look beyond the horizon.

The Israeli chemist, one of the most famous crystallographers in the world, presented her revolutionary bacteria ribosome research in Lithuania, from where her grandparents came. The venue of the largest conference in the Baltic Region was just a few kilometers from the place where almost 40 years ago the potential of Soviet biotechnological science was concentrated. The host of the conference Lithuania is a country aspiring to become The Next Start-up Nation.

In 1975, the only Applied Enzymology Scientific Research Institute in the Soviet Union was founded in Vilnius.  23 years on since Lithuania regained its independence and fuelled the collapse of the Soviet Union, the Lithuanian life sciences sector comprises over 130 companies and 47 institutions. 80% of their products are exported to over 100 countries of the world. Notwithstanding the economic recession, export volumes have been growing by 17% on average every year in the last 5 years and amounted to USD 430 million in 2012.

The rapidly growing life sciences sector in Lithuania is driven by two key trends – a well-established R&D base and an environment favorable for business and investments.

The success of Lithuanian biotechnology industry is attributed to the educational system involving 16 academic institutions and 15 R&D centres, a pool of 18 000 researchers and specialists of life sciences area.

Lithuania with a population of 3 million is among top EU countries by the percentage of specialists with higher education. Physics and life sciences universities currently have 3400 students and produce 750 graduates every year.

Having set an ambitious target to become one of the top high tech innovation centres in Europe, Lithuania is investing USD 535 million into 5 research valleys and offers particularly favorable tax reliefs for R&D projects. Companies in Lithuania enjoy triple deduction for R&D development costs, in contrast to double deduction applied in most developed countries. Other favorable tax incentives for investments into R&D include super-accelerated depreciation when the acquisition price of fixed assets used in R&D activities is written-off within two years and the possibility to reduce taxable profits by 50% by investing into substantial technological improvements.

All this helped Lithuania to create one of the fastest growing life sciences industries in the world. Over the last 10 years the annual growth average of the industry was 22%, and now Lithuanian lasers used for scientific research make up 10% of the global market.

Impressive results and vast opportunities attracted the world’s leading players of life sciences industry to Lithuania.

In 2010 Thermo Fisher Scientific Inc., the world leader in serving science, acquired Fermentas, a Lithuanian manufacturer of enzymes, reagents and kits for molecular and cellular biology research for approximately USD 270 million.

In September 2012, Thermo Fisher Scientific opened a new molecular biology centre of excellence in Vilnius, Lithuania. The site will enable the company to showcase its capabilities for developing and manufacturing products used in a range of life science applications, providing molecular, protein and cellular biology products to meet customers’ growing demand in Eastern Europe.

Thermo Fisher Scientific is one of several large Western companies, which have recently entered the Lithuanian market through acquisitions.

In 2009, Moog Medical Devices acquired Lithuanian company Viltechmeda, which manufactures, sells and repairs medical equipment, devices for infusion and syringe pumps. The company announced investing another USD 5.3 million in 2010 to establish a service centre and expand its research and technology brand.

Israeli company TEVA Pharmaceutical Industries, which is the second largest generic pharmaceutical company in the world, acquired Lithuanian biotechnological pharmacy company Sicor Biotech in 2006. Now USD 30 million of foreign direct investments is being made into the development of a new multifunctional Sicor Biotech/Teva plant, which is expected to come into operation at the end of 2013. TEVA’s biosimilar cancer drug tbo-filgastrim, which won FDA approval in August 2012, is based on a technology developed in Lithuania.

Lithuania is becoming a new hub of biotech activity. The first Life Sciences Baltics conference held last year gave momentum for this activity and Lithuania is already making preparations for a bigger event to be held on 10-12th of 2014 when the second Life Sciences Baltics will take place in Vilnius.

Lithuanian biotech industry is also very active in its market outreach to the United States: Lithuanian biotechnology sector was highlighted in 2013 BIO International Convention in Chicago. Upcoming business promotion events under the Lithuanian Presidency of the EU Council umbrella include a joint Baltic States Business Mission and Baltic Days  in Biopharm America exhibition, organized in cooperation with MASSBIO (Boston,16-19  September 2013), Baltic business program with the European-American Chamber of Commerce in Cincinnati, OH in late Fall and a Lithuanian biotech business delegation to 2014 BIO International Convention in San Diego, CA.

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