City maintains balance between East and West

  • 2005-07-20
  • By Milda Seputyte
KLAIPEDA - Considered one of the country's economic leaders, the Klaipeda region excels in business development. It's growth in terms of direct foreign investment, GDP per capita and average salaries place Klaipeda among the nation's three strongest regions. Its coastal city alone creates some 80 percent of the area's GDP.

"The Klaipeda region is a leader in the state economy. Only Klaipeda and Vilnius exceed the average Lithuanian GDP. This makes Klaipeda the center of western Lithuania," said Vilija Tauraite, chief analyst at SEB Vilnius Bank. "The main advantages of Klaipeda are its profitable geographic location and Klaipeda's Free Economic Zone, which is very active in attracting foreign direct investment," said Tauraite.

Klaipeda's success in attracting direct foreign investment is something most Lithuanian regions only dream about. Over the last year, the region received some 123 million litas (35.6 million euros) in foreign investments - a 12.7 percent rise from 2004. Denmark, with 29 percent of total foreign investment into the district, tops the list of active investors.

Meanwhile, the coast is doing its utmost to provide a favorable business climate, the Klaipeda Free Economic Zone being the best example. Now operating in its third season, the zone has assembled four companies within its 205-hectare territory, strategically located near Klaipeda. An additional four contracts have been signed with businesses soon to be launched.

The Japanese company Yazaki Wiring Technologies Lietuva, the Danish fish processing plant A.Espersen A/S, the developers of a business complex Klaipedos Verslo Parkas/BNTP UAB, and Austrian PET packing pre-forms company Nemuno banga Klaipeda now employ some 3,600 people on-site.

Companies investing in the center have either reduced or zero-profit tax benefits and no tax on dividends. These tax incentives are regarded as state aid for regional development, and comply with all European regulations.

Having received some 10.8 million litas from EU structural funds for the development of an industrial park this June, the free economic zone is expecting another boost. More than 40 hectares of territory will be developed, and 10-15 land plots will be reserved for future business accommodators.

What's more, Klaipeda has one of the lowest unemployment rates in the country 's 4 percent as of July. "The low unemployment rate is related to the country's rising economy, and also to emigration flows, which is a negative effect since we hear from entrepreneurs that a better qualified labor force is needed," said Tauraite.

Meanwhile, tourism is playing its own part in the economy. Cruise ships are increasingly adding Klaipeda to their tour itinerary, which means the number of visitors exploring the Old Town's cobblestone streets will grow. Even one of the world's largest cruise ships, the Constellation, included the port town on its nautical map this year. Three visits by the Constellation this summer are expected to increase the port's budget by some 0.5 million litas.

"Tourists are interested in Klaipeda and twice as many ships are visiting the port after a new cruise terminal was constructed two years ago. We have some problems with visas for third countries, but that's a temporary difficulty," Director General Sigitas Dobilinskas said. "This is a joint project for all Baltic states, and everyone is equally interested," he said.

However, Klaipeda isn't all utopia. Tauraite pointed out the region's high real-estate prices and lack of land, especially for housing developments 's the region's main economic struggle. Other barriers, such as increasing production costs and emigration, are typical shortcomings throughout the entire country, she said.