LITHUANIA: Sound in resources for businesses 2011

Lithuania in the world Territory: 65,300 km2 Common borders with: Latvia Belarus Poland Russia (Kaliningrad Region) Population: 3.4 million 84% of Lithuanians 7% Poles 6.5% Russians Capital and biggest city: Vilnius - population: 549,000 State language: Lithuanian State Government: Democratic Republic Religion: 80% of Roman Catholics, 5% Orthodox

Business opportunities on the Lithuanian market International business presence in the EU, Scandinavian and Eastern markets Excellent infrastructure and communications network High operational quality at a competitive cost Financial support and fiscal incentives for businesses Non-financial support

International business presence BSR - 110 million • Member of the EU, NATO and Schengen area • Crossroads of three huge markets EU - 340 million CIS - 250 million

Half of the Baltic States’ economy Source: Lithuanian Department of Statistics, www.stat.gov.lt

Lithuanian economy at a glance 2005 2006 2007 2008 2009 2010 2011F GDP, EUR bn 20.9 23.9 28.6 32.2 26.7 27.2 GDP growth (annual), % 7.8 9.8 2.8 -14.8 1.3 Annual inflation, % 2.7 3.8 5.8 11.1 4.2 1.1 1.8 FDI, EUR bn 4.7 6.9 8.4 10.3 9.2 - Exports, EUR bn 9.5 11.3 12.5 16.1 11.7 16.8 Imports, EUR bn 12.4 15.4 17.8 21.1 13.1 16.2 Unemployment, % 8.3 5.6 4.3 13.7 17.9 15.8 Sources: Lithuanian Department of Statistics, www.stat.gov.lt, Ministry of Finance, www.finmin.lt

GDP by economic sectors, 2009 Source: Lithuanian Department of Statistics, www.stat.gov.lt

FDI in Lithuania, EUR bn Source: Lithuanian Department of Statistics, www.stat.gov.lt

Major countries investors, 2009 Source: Lithuanian Department of Statistics, www.stat.gov.lt

FDI in Lithuania by economic sector, 2009 Source: Lithuanian Department of Statistics, www.stat.gov.lt

Multinationals feeling at home

Lithuania’s foreign trade, EUR bn Source: Lithuanian Department of Statistics, www.stat.gov.lt

Lithuanian export dynamics Years / Country EU CIS Russia USA China 2009, EUR M 7583,6 2765,9 1562,3 347,8 21,9 2004, EUR M 5001,7 1221,2 693,6 353,2 9,4

Lithuania’s major exports destinations, 2009 Source: Lithuanian Department of Statistics, www.stat.gov.lt

Major importers to Lithuania, 2009 Source: Lithuanian Department of Statistics, www.stat.gov.lt

Lithuania’s exports by products, 2009, % Source: Lithuanian Department of Statistics, www,stat,gov,lt

Lithuania’s imports by products, 2009, % Source: Lithuanian Department of Statistics, www,stat,gov,lt

Sources: www.eurostat.com Lithuania’s “gold and oil” One of the best-educated people in Central and Eastern Europe; 23 universities and 23 colleges with a total enrolment of 201,000 students; 35 science institutes Kaunas University of Technology – largest technical university in the Baltic States One of the most multilingual peoples in the EU – among five EU countries with the highest percentage of people speaking at least one foreign language (mostly English, Russian and Polish) Sources: www.eurostat.com

Wages, 2010 1Q Wages EUR Minimal hourly wages 1.40 Minimal monthly wages 232 Average monthly wages 588 Source: Lithuanian Statistics Department, www.stat.gov.lt

Main business taxes Tax % Corporate profit tax 15 VAT 21 Dividends 0* to 15 Personal income tax (+ 6% health insurance contribution) Social security tax for employer 31 (+employee’s contribution of 3%) * 0% tax on dividends applies when an investor controls at least 10% of voting shares in the enterprise for the period of at least 12 months.

Business set-up costs Opening a company: up to EUR 600 (documentation preparation, notary public services, registration) and up to 15 days Minimum authorized capital for: private companies – EUR 2.900 public companies – EUR 43.450

Excellent infrastructure and communications network The European Union has recognized Lithuania as the prime transport centre in the region linking the EU with the East Crossroads of international transport routes – two EU- priority transport corridors International airports (located in Central, Eastern and Western Lithuania) with direct routes to most European cities Northernmost and only ice-free seaport on the eastern shore of the Baltic Sea – Klaipėda State Seaport

Klaipėda State Seaport – major transport hub Transport hub, connecting sea, land and railway routes from East and West; main shipping lines to the ports of Western Europe, South-East Asia and the continent of America pass through the port Handling more goods than all the ports of Ireland combined; container handling capacity the greatest among the Baltic ports Handling roughly 7,000 ships and 30 m tonnes of cargo every year, accepting large tonnage vessels: dry-cargo vessels up to 80,000 DWT, tankers up to 150,000 DWT and cruise ships up to 270 meters length

Dense network of shipping lines

Financial support & fiscal incentives Financial packages offered by the Government to cover wage and personnel training costs, purchase of equipment etc. Tax incentives for investments into new technologies and R&D Land and real estate tax relieves 0% taxation on dividends when an investor controls at least 10% of voting shares in the enterprise for the period of at least 12 months Tax “holidays” in 2 free economic zones

Ready-for-investment locations 2 free economic zones (FEZ): 0% corporate tax during the first 6 years and only 50% of corporate tax over the next 10 years 0% tax on dividends 0% real estate tax 4 industrial parks (IP): Greenfield territory from 15 to 219 ha (corresponding to the investor requirements) All necessary physical infrastructure Tax incentives

Valleys for fusion of science and business Network of R&D centres in 3 largest cities Specialization in different scientific reasearch areas Great concentration of talent Sufficient supply of new office space Government’s support (EUR 400 M grants in 2010-2012)

Incentives for new technologies and R&D Scientific research and experimental development (R&D) costs deducted 3 times from income for the tax period during which they were incurred, if the performed R&D works are related to the usual or intended activities of the entity that generate or will generate income or economic benefit Super-accelerated depreciation - acquisition price of fixed assets used in the R&D activities can be written-off within two years Investments into substantial technological improvements will entitle the companies to reduce the taxable profit down by 50%

approx. EUR 7 billion (approx. EUR 3 billion in 2004-2006) EU support for Lithuania in 2007-2013 approx. EUR 7 billion (approx. EUR 3 billion in 2004-2006) Source: Ministry of Finance, www.finmin.lt

Non-financial support Agreements with the Government and Ministry of economy, when FDI exceeds EUR 6 M or EUR 1.5 M, respectively Government’s assistance for VIP FDI projects Tailor-made information packages, guidance through all the investment process (contact building, arranging visits and meetings, dealing with authorities, investment site selection etc.) as well as investment aftercare by Invest Lithuania

Diversified industry 25,9% of total FDI settles down in industry (EUR 2,5 bn as of Q1 2010) Industry+construction – 29% of of total FDI (25% country’s GDP) Source: Lithuanian Department of Statistics, www.stat.gov.lt

Attractive economy sectors (1) Transport & logistics – excellent geographical location and infrastructure; prime transport centre in the region linking the EU with the East Energy – well developed infrastructure and international projects Shared services and business process outsourcing (BPO) – well-educated multilingual labour pool ICT – modern knowledge economy; companies leading among the Baltic States Biotech – World-class progress; production does not have equivalents in Central and Eastern Europe Plastics – with three huge plants leading in the region Lasers – globally acknowledged production and inventions

Attractive economy sectors (2) • Metal processing, machinery & electric equipment – widely-acknowledged high-tech products • Furniture & wood processing – one of the largest factories in Eastern Europe; among most important suppliers for IKEA • Textile & apparel – one of the most specialised EU countries in the textile and clothing sector • Food – internationally acknowledged production; widely demanded • Real estate – largest market among the Baltic States with the great development potential • Tourism – untouched ecological nature, well developed countryside tourism network, high demand for entertainment services

Sources: www.stat.gov.lt; www.transp.lt; www.portofklaipeda.lt Major opportunities: Transport and logistics (1) Lithuania is the prime transport centre in the region linking the EU with the East (EU Transportation Commission) two transport corridors (I and IX B) and their branches (IA and IXD) (80 % of European freight is transported via international transport corridors crossing Lithuania) the northernmost ice-free seaport on the eastern cost of the Baltic sea – Klaipėda State Seaport: annual cargo turnover of 30 million the best road system in the region 3 international airports 3 international and regionally important public logistic centres under construction Sources: www.stat.gov.lt; www.transp.lt; www.portofklaipeda.lt

Sources: www.stat.gov.lt; www.transp.lt; www.portofklaipeda.lt Major opportunities: Transport and logistics (2) 13.5% of GDP 67% of services exported 3% of country’s FDI approx. 5.900 companies 64,000 employees 20.246 trucks Sources: www.stat.gov.lt; www.transp.lt; www.portofklaipeda.lt

Major opportunities: Energy (1) Well developed infrastructure and international projects the only oil refinery in the Baltic States, oil export and import terminal, oil products import-export terminal, natural gas supply system and central heating system nuclear, large combustion plants, co-generation plants, hydro and pump storage power plants planned electricity links with Western and Nordic markets, construction of a new nuclear power plant and construction of liquefied natural gas import terminal Source: www.stat.gov.lt

Major opportunities: Energy (2) 3.86% of GDP 0.7% of exports 8.4% of country’s FDI 18.500 employees Source: www.stat.gov.lt

Major opportunities: Shared services and business process outsourcing (BPO) (1) Well-educated multilingual labour pool and leading ICT resources ~30% of population with higher education – one of the best-educated workforces in CEE ~90% of Lithuanians speak at least one foreign language: every second speaks two foreign languages, every third speaks English 23 universities and 23 colleges: more than 40,000 university and college graduates every year excellent ICT infrastructure: Highest fiber penetration (23%) in Europe (6th in the world) World’s fastest upload Internet and 4th by broadband quality score Densest network of public Internet access points (875) in Europe EU’s highest GSM penetration (147%) Global leadership in the number of mobile telephone subscribers per 100 population Sources: www.stat.gov.lt; www.datamonitor.com; www.smm.lt; www.rrt.lt; World Economic Forum Global Competitiveness Report 2008-2009; GSM European Coverage 2007

Major opportunities: Shared services and business process outsourcing (BPO) (2) 11 contact centres Approx. 2.500 employees Sources: www.stat.gov.lt; www.datamonitor.com; www.smm.lt; www.rrt.lt; World Economic Forum Global Competitiveness Report 2008-2009; GSM European Coverage 2007

Major opportunities: ICT (1) Modern knowledge economy development of knowledge society is a national priority funded by the State and the EU 13 out of 20 largest IT companies in the Baltic States are based in Lithuania 7 universities and 8 colleges with IT curriculums excellent ICT infrastructure: Highest fiber penetration (23%) in Europe (6th in the world) World’s fastest upload Internet and 4th by broadband quality score Densest network of public Internet access points (875) in Europe EU’s highest GSM penetration (147%) Global leadership in the number of mobile telephone subscribers per 100 population Sources: www.stat.gov.lt; www.primeinvestment.lt; www.rrt.lt; World Economic Forum Global Competitiveness Report 2008-2009; GSM European Coverage 2007

Major opportunities: ICT (2) 2.1% of GDP 3.5% of total exports 13.7% of total FDI in the country ~ 2.000 companies 24.000 employees Sources: www.stat.gov.lt; www.primeinvestment.lt; www.rrt.lt; World Economic Forum Global Competitiveness Report 2008-2009; GSM European Coverage 2007

Major opportunities: Biotech industry (1) World-class exemplary performance Lithuania – the biotech hub of CEE; products don’t have equivalents in CEE World-class research and inventions, e.g TevaGrastim® cancer treatment medicine, 30 % cheaper but as effective as existing medicine 15 biotech research centres 1st Baltic medical and pharmaceutical valley in the Baltic countries 16 institutions (including 5 major universities) train biotech specialists for science and business Source: www.stat.gov.lt

Major opportunities: Biotech industry (2) Annual growth of ~22 % 0.1% of GDP 99% exported to 86 countries Over 1.000 employees Source: www.stat.gov.lt

Major opportunities: Plastics (1) 3 regional leaders are based in Lithuania worlds' best PET technologies  flexibility and adaptability to market changes –pre-forms of various colours, weight and shape Lithuanian trademark NEOPET® is recognised as a premium-quality brand among European customers strict procedures of quality control and manufacturers’ orientation to international ISO standards highly educated specialists – 2 universities prepare specialists for plastics industry Source: www.stat.gov.lt

Major opportunities: Plastics (2) 0.8% of GDP 58% of production exported 0.9% of total FDI in the country more than 360 companies ~10.000 employees Source: www.stat.gov.lt

Major opportunities: Laser technologies (1) Globally acknowledged production and inventions Development of unique laser devices: - 50 % of the world market for high-energy pico-second lasers - Leadership in global production (80 %) of ultra-fast parametric light generators Global leadership in applying fundamental research into manufacture: 11 science centres and laser technology research centres carry out fundamental research Source: www.stat.gov.lt

Major opportunities: Laser technologies (2) Annual growth of ~20 % Largest share in value added created on the national market Sales of almost EUR 30M; increase of 2.4 times in last 5 years ~80 % exported to nearly 60 countries ~450 employees Source: www.stat.gov.lt

Sources: www.stat.gov.lt; www.ktu.lt Major opportunities: Metal processing, machinery and electric equipment (1) Widely-acknowledged high-tech products flexibility to satisfy small and non-standard orders subcontracting for famous brands quality management system ISO 9001:2000 high potential for research and development (R&D) biggest technical university in the Baltic countries - 17,000 students Baltic leaders in the sector operate in Lithuania Sources: www.stat.gov.lt; www.ktu.lt

Sources: www.stat.gov.lt; www.ktu.lt Major opportunities: Metal processing, machinery and electric equipment (2) 4.9% of GDP 64% of production exported 1.4% of country’s FDI ~1.000 companies 46,000 employees Sources: www.stat.gov.lt; www.ktu.lt

Major opportunities: Furniture and wood processing (1) Lithuania’s largest factories are among the most important suppliers for IKEA highly forested country, deep traditions in the wood processing industry production meets the highest quality requirements and design standards competitive prices good geographical location – short delivery terms flexibility to fulfil non- standard orders biggest office furniture factory (30,000 sq.m.) in the Baltic States Source: www.stat.gov.lt

Major opportunities: Furniture and wood processing (2) 1.8% of GDP 55 of production exported 1.5% of country’s FDI more than 1,570 companies over 50,000 employees Source: www.stat.gov.lt

Source: www.stat.gov.lt; www.latia.lt Major opportunities: Textile and clothing (1) One of the most specialised EU countries in the textile and clothing sector long-term traditions 2,500 new specialists are prepared annually flexibility and short delivery terms high quality and attractive design production meets European standards Source: www.stat.gov.lt; www.latia.lt

Source: www.stat.gov.lt; www.latia.lt Major opportunities: Textile and clothing (2) 1.8% of GDP 76% of production exported; 84% exported to EU 1.3 % of country’s FDI more than 1,000 companies 40,000 employees Source: www.stat.gov.lt; www.latia.lt

Sources: www.stat.gov.lt; www.litfood.lt Major opportunities: Food industry (1) Internationaly acknowledged production deep manufacturing traditions favourable climate for agriculture well developed transport infrastructure favourable geographic location modern technologies Lithuanian beer was awarded at “European Beer Star Awards”, “World Beer Cup” and “World Beer Championship” Sources: www.stat.gov.lt; www.litfood.lt

Sources: www.stat.gov.lt; www.litfood.lt Major opportunities: Food industry (2) 3.6% of GDP 36% of production exported 4.2% of total FDI in the country dairy production makes 15% of food exports, 58% of dairy production exported to the EU over 57,000 employees sector accounts for a major share of the added value (20.9 %) created by the Lithuanian manufacturing industry Sources: www.stat.gov.lt; www.litfood.lt

Major opportunities: Real estate and construction (1) Great development potential Lithuania - one of the EU leaders in the retail market growth (12.6%) among the most developed European countries in terms of shopping centres per capita (165 q.m.) modern A and B class offices across the country new retail projects across the country high potential for the development of economy accommodation and recreation (SPA) hotels as well as conference tourism facilities across all the country Sources: www.stat.gov.lt; www.eurostat.com; www.colliers.lt; www.resolution.lt

Major opportunities: Real estate and construction (2) 21% of GDP (2007) 9.7% of country’s FDI over 244,000 employees Sources: www.stat.gov.lt; www.eurostat.com; www.colliers.lt; www.resolution.lt

Sources: www.stat.gov.lt; www.tourism.lt, www.portofklaipeda.lt Major opportunities: Tourism (1) Untouched ecological nature, well developed countryside tourism network, high demand for entertainment services unique costal area of almost 100 km rich natural resources (22,000 rivers and rivulets, about 3,000 lakes) 4 Lithuanian sights and 2 cultural traditions are on the UNESCO World Heritage Lists modern up-to date SPA resorts in an ecological environment (Druskininkai, Birstonas, Neringa ir Palanga) developed recreational infrastructure: 2 world-standard water amusement parks, 5 ice rinks, a number of theatre and cinema halls, multifunctional amusement centres well-known cruise lines regularly visit Klaipeda State Seaport Sources: www.stat.gov.lt; www.tourism.lt, www.portofklaipeda.lt

Sources: www.stat.gov.lt; www.tourism.lt, www.portofklaipeda.lt Major opportunities: Tourism (2) 2.7% of GDP value added growth of 10% annual growth of approx. 8% of the accommodation of foreign tourists in the country 46.800 employees in the sector Sources: www.stat.gov.lt; www.tourism.lt, www.portofklaipeda.lt

Lithuanian market prospects Northern Europe Service Hub 2015: B2B services Logistics centre Medical services centre Centre of Excellence and Innovation for Traditional Industries 2015 Northern Europe Innovation Centre 2020

High quality of life Quality of life: one of the highest in the EU; higher than Sweden, Great Britain and Greece Among TOP 10 least expensive countries in Europe Almost 3.800 medical institutions, more than 13 thous. doctors, 400 doctors for 100,000 inhabitants 3.893 wireless Internet zones Sources: International Living 2010 Quality of Life Index, Eurostat; Communications Regulatory Authority

Perfect place for vacation 4 UNESCO World Heritage sites Well-preserved nature, ecological tourism World-class entertainment and leisure services, international cultural festivals