Business Analysis: Baltic Exporters need to be realistic

  • 2011-03-16
  • By Charles Cormack

I think there is a new breed of inward investor looking at the Baltic markets at the moment, and it could offer an excellent way of securing long term high quality jobs for the country or countries which are able to understand and capitalize on the opportunity.

I spent all last week on the road in the UK promoting Lithuania as an inward investment destination to UK businesses. That in itself is not unusual; we often work on behalf of Invest Lithuania, helping them to run seminars and find UK businesses interested in developing their businesses in Lithuania.

What was unusual was the turn-out at the events and the quality of the people who came. Over the past years we have sometimes struggled for an audience, and when we have got one the quality has been questionable. This time we had standing room only at one event, and the quality of the companies coming was consistently high; so why the change?

I spent time after the seminars talking to some of the people who came to find out why they had decided to take a morning out of their busy lives to find out about Lithuania. Again, the responses were illuminating; all seemed to agree that the UK is heading for a very difficult time over the next 18 months, yet most of the companies who came to the seminars were reporting strong order books, and were looking to increase their workforce to cope with the increase in business. So why, you may ask, if this is the case why not just recruit from the growing pool of unemployed people in the UK?

Well, the uncertainty about the economy is one reason; these companies, though all are doing well at the moment, are aware things may change and, as a result, they want to look at taking advantage of the skilled people and lower wage rates available in “Eastern Europe.” They also understand that export is more important than ever, so believe that establishing a presence in a new geography, especially one which is so well positioned to offer access to Russia/CIS and Scandinavia, is potentially a way to open new and exciting markets for their products or services.

So it seems that there is a growing real interest from UK technology and services businesses to look at developing their businesses in and through the Baltics. These companies come from the SME sector, so their initial investments will not be large, but they have the potential to bring highly skilled jobs to the markets, and more importantly, they see the investment as a key part of their internationalization strategy, meaning they will be there for the long term, and that they will be looking to grow their workforces over a number of years. This means an excellent opportunity for the governments in all three Baltic States to focus on targeting these companies, and attracting them to the Baltic.

So how to capitalize on this interest? Well, firstly the development agencies need to work hard to promote the Baltics and their countries in particular, as the lack of UK knowledge of the area means that to many, the Baltics could be next to the Balkans; they just understand that there are opportunities in “Eastern Europe.”
As a result, I think there is a case for a joint Baltic Business Opportunities marketing campaign in the UK. It seems to me that the word “Baltic” has a more positive image to British people than Latvia, Estonia or Lithuania. Also, there is a need to differentiate the Baltics from the rest of CEE in the minds of the audience. However, if this is not possible, then the agencies need to do this independently.

Once the interest in the area is secured, it will then be up to the agencies to fight to secure the investment for their country. The winner will be the agency which is able to make the company comfortable with their market, and which offers the best information and customer support, and who wants to really work with the UK company, understanding that for this business this is a vital decision, and that it needs to help in areas away from the pure inward investment angle (helping them to understand what the local market may be for their product, etc.).

It will be the agencies that are able to offer this level of support that will win the battle for these companies, as their size will normally preclude them from generous financial incentives, as these will not have the same importance. It is more about helping them find staff and offices, helping them with company registration, understanding local laws, etc.
From my experience, Invest Lithuania already understands this and is offering a very high level of service to the potential investors. Already this is bringing in results, and is likely to bring in further successes over the next few months. As for the others, they will need to find a way of doing the same if they are to take advantage of this new wave of inward investment.