Where Machinery comes together KAUNAS REGION. 2 Source: Statistics Lithuania, VRM, Invest Lithuania 2014 Welcome to Kaunas Region, Lithuania! KAUNAS REGION

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Where Machinery comes togetherKAUNAS REGION

2Source: Statistics Lithuania, VRM , Invest Lithuania 2014 Welcome to Kaunas Region, Lithuania!KAUNAS REGION statsRegional capitalKaunas CityPopulation593,000Labour pool289,000Unemployment31,300 (10.1%)FDI growth11.4%

LITHUANIA statsSize65,300 km2Population2.97 millionCapitalVilniusOfficial languageLithuanianCurrencyLithuanian Litas (LTL)Pegged to Euro since 20021 Euro = 3.45 LTLReal GDP growth2013: 3.2%2012: 3.7%2011: 6.0%FDI growth 8.1 %Annual inflation1.2%Lithuania is at the center of three of large consumer markets: Western EuropeBaltic Sea RegionRussia and former Soviet States (CIS) Kaunas Region

KAUNAS REGIONWhere Machinery comes togetherBuck Consultants International2Source: * World Bank, Invest Lithuania 2014Lithuania, a gateway to the EU and CIS

KAUNAS REGIONLithuania allows access to main markets*:Member of the European UnionMember of the Schengen Agreement (free trade and travel)Member of NATOMember of the Nordic Investment Bank, and part of Nordic-Baltic cooperation of Northern European countries Lithuania is ranked 17th of the world on the Ease of Doing Business Index (higher than e.g. Germany, Latvia or Poland) *Lithuania is a low risk country in the Central and Eastern Europe region, making it an excellent alternative for nearby high risk countries as Russia or Belarus

European Union is the largest single market in the world (almost double the GDP of China) with over 500 million consumers (source: IMF)

Risk rating of Lithuania compared to other countries (100= most risky)Source: Economist Intelligence Unit Q2 2014Where Machinery comes togetherBuck Consultants International3Worldwide customers of engineering companies in LithuaniaSource: Invest Lithuania 2013

KAUNAS REGIONSource: Invest Lithuania 2013Largest sub sectors of mechanical engineering and machineryMachinery sector LithuaniaSource: Invest Lithuania 2014

Strong enigineering cluster with over 2,000 manufacturers having approx. 38,000 employees, out of which ~80% work in mechanical engineering sector. Over 70% of engineering production is exported Mechanical engineering and Machinery is highly competitive and one of the fastest growing segments of manufacturing industry in Lithuania. Over 2009-2012, the production value of mechanical engineering sector grew at an average annual rate of 18% Major foreign companies within the industry: Schmitz CargoBull, Kinze Manufacturing, Stansefabrikken, CIE Automotive, KB Components and many othersMain export destinations: Germany, Russia, Sweden, Norway, Denmark and Poland.Where Machinery comes togetherKrcherNASABOEINGBMWGMAudiWolkswagenVolvoChryslerMagnaFordRenaultToyotaScaniaHusqvarnaABBBombardierRolls-RoyceBoshSiemensBuck Consultants International4

KAUNAS REGIONThe Kaunas Region provides an unmatched mix of cost-effective production workforce and high class infrastructure

Where Machinery comes togetherHighly educated and multilingual talentThe right peopleThe right educationThe right languagesIndustrial parksThe right industrial parksThe right cost advantages

Cost attractivenessThe right labor cost savingsThe right tax scheme

International accessibilityThe right locationThe right direct flights

InKAUNAS REGIONit all comes togetherManufacturing workforceKaunas region has a long history of mechanical engineering and machinery productionIn Kaunas Region over 50,000 people are employed in the machinery sector, which is almost 20% of the total workforceThe Kaunas region workforce is highly educated with 39% of workers having a third level diploma (Lithuania: 34%; EU: 24%). Virtually all highly educated graduates speak EnglishThe five universities in the Kaunas region have 9,000 students in technological sciences, which is nearly half of all Lithuanian tech studentsProduction workers are largely available in the Kaunas Region with a > 10% unemployment (2012)

KAUNAS REGIONSources: Lithuanian Statistical Department, VRM, Invest Lithuania 2014Source: wwww.kitron.comKB Components (Sweden)

Is one of the leading suppliers of technically advanced products for light vehicles, heavy vehicles, medical and industrial applications. It has ultra-modern operations in Scandinavia and in Kaunas, Lithuania. The facilities in Kaunas offer cost-efficient production of labor intense productsSource: www.kbcomponents.comKitron (Norway)

Is anElectronics Manufacturing Services(EMS) company with operations in Norway, Sweden, Lithuania, Germany, China and USA.With260 highly skilled employees in Kaunas,Kitron manufactures and delivers electronics assembly, box-build products, cable harnessing from fully assembled electronic circuit boards to complete end products forcustomers globally.Companies that selected Kaunas in the last two years for the availability of cost-effective, high quality labourWhere Machinery comes togetherBuck Consultants International67Employer cost are based on the following expenses: gross salary, social security, medical and pension costs in addition to social security and performance bonuses Source: National/Regional Statistical Offices, IMD, UBS, 2014

KAUNAS REGIONAnnual full employers cost skilled industrial worker (Euro)* Source: Invest in Lithuania, FEZ Kaunas, FEZ Kdainiai 2014 TaxGeneralFree Economic Zone Income tax15 %0 % (first 6 years)50% of the tax rate (subsequent 10 years) Property tax1 %0 % Dividend tax15 %0 %Tax rates*In general, labour costs in Lithuania are less than half compared to Western European countries and the USAKaunas is a very cost attractive location for manufacturing facilities as employers cost levels are 15% lower compared to Vilnius and 30-50% lower than in Poland, Slovakia and HungaryStandard income tax rate is one of the lowest in Europe at 15%. If established in a Free Economic Zone (FEZ), property and dividend tax is at 0% and income tax is at 0% for the first 6 years and 7.5% for the following 10 years*Where Machinery comes togetherCost attractivenessBuck Consultants International78Many companies see Lithuania as a springboard from which to penetrate the vast markets of the EU and the Russia-Kazakhstan-Belarus Customs Union and other CIS countries.The latter is increasingly important now that Russia has joined the World Trade Organization*Kaunas is connected to Poland (and the rest of the EU), Belarus and Russia by rail and road


Baltics, Russia, CIS, CEE and Germany are reached within two truck days*Where Machinery comes togetherInternational accessibility Kaunas Region is conveniently located on crossroads of modalities

Source: BCI, 2014* Source: Invest Lithuania, 2013Buck Consultants International89Two major trans-European corridors connect Lithuanias market to the rest of the EU Rail links to China in 15 days via Kazakhstan Rail links to the Black Sea ports via Belarus and Ukraine in 55 hoursThe Port of Klaipeda, one of the northernmost ice-free ports in the world, is well connected to Kaunas by road and rail infrastructureA modern truck fleet of 25,000 units; almost the same size as the entire fleet of the Russian Federation (30,000)Kaunas airport, which is the second largest airport in Lithuania, serves 8 international destinations (incl. London, Birmingham, Dublin, Oslo and Frankfurt) throughout the year on a weekly basisVilnius International Airport is located within a one hour drive providing 2-3 flights per hour and more daily direct flights to major European capitals and cities

KAUNAS REGIONWhere Machinery comes togetherInternational accessibility Buck Consultants International9The two Free Economic Zones of Kaunas Region are good locations for the setting up of manufacturing facilities. The zones provide favourable and lower taxes for investors investing at least Euro 1 million

The logistics and manufacturing area of Kaunas FEZ comprises 294 hectares. It is occupied by several different companies in automation, insulation boards, etc. Direct foreign investments in Kaunas FEZ account for 76% of all investments

The Kdainiai FEZ offers 9 plots for investors, with already installed water supply, sewage, surface waste water, pipeline and road infrastructure. The size of the proposed plots vary from 6,26 to 20,86 ha. Targeted activities are industrial and storage premises, construction of industrial and warehousing companies, etcSource: Kdainiai FEZ, FEZ Kaunas, 2014

KAUNAS REGIONThe Kaunas FEZ provides 294 hectares of logistics and production area

Where Machinery comes together

The Kdainiai FEZ provides 9 plug-and-play plotsIndustrial parksBuck Consultants International10Source: Invest Lithuania, 2014

KAUNAS REGIONFinancial support available per FDI project in the field of services Construction, Infrastructure, Salary costsPersonnel training costsUp to Euro 1.5 millionUp to Euro 2 millionMax. possible support 3.5 million EuroForeign investors interested in locating a business in Lithuania as well as foreign companies already operating in the Lithuanian market but eager to further expand may apply for Invest in Lithuanias financial investment support of up to Euro 3.5 million per investment project Invest in Lithuania provides financial support to cover personnel training costs (up to Euro 2 million) as well as eligible construction, infrastructure and salary costs (up to Euro 1.5 million), incurred by foreign investors establishing a services business unit in LithuaniaThe financial support tool is designed to support foreign businesses investing into the production of export-oriented high-quality services as well as establishment of qualified jobs on the marketWhere Machinery comes togetherNational incentives support programBuck Consultants International11InformationConsultancyAnalysisSearchGuidanceNetworkingAssistanceAftercare One stop sho