Where Machinery comes together

Where Machinery comes together

KAUNAS REGION

2Source: Statistics Lithuania, VRM , Invest Lithuania 2014

Welcome to Kaunas Region, Lithuania!

KAUNAS REGION stats

Regional capital Kaunas City

Population 593,000

Labour pool 289,000

Unemployment 31,300 (10.1%)

FDI growth 11.4%

LITHUANIA stats

Size 65,300 km2

Population 2.97 million

Capital Vilnius

Official language Lithuanian

Currency Lithuanian Litas (LTL)Pegged to Euro since 20021 Euro = 3.45 LTL

Real GDP growth 2013: 3.2%2012: 3.7%2011: 6.0%

FDI growth 8.1 %

Annual inflation 1.2%

Lithuania is at the center of three of large consumer markets: • Western Europe• Baltic Sea Region• Russia and former Soviet States (CIS)

Kaunas Region

KAUNAS REGIONWhere Machinery comes together

Source: * World Bank, Invest Lithuania 2014

Lithuania, a gateway to the EU and CISKAUNAS REGION

• Lithuania allows access to main markets*:– Member of the European Union– Member of the Schengen Agreement

(free trade and travel)– Member of NATO– Member 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

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LithuaniaPolandHungaryRussiaBelarus

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 2014


Worldwide customers of engineering companies in Lithuania

Source: Invest Lithuania 2013

KAUNAS REGION


Largest sub sectors of mechanical engineering and machinery

Machinery sector Lithuania


• 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 others

• Main export destinations: Germany, Russia, Sweden, Norway, Denmark and Poland.


38%

12%10%

9%

8%

5%

3%3%

12%

Plastics

Other general purpose machinery

Structural metal products

Other fabricated metal products

Bodies for motor vehicles

Other products of first processing of steel

Ships and boats

Other transport equipment

Other

KärcherNASABOEINGBMWGMAudiWolkswagenVolvo

ChryslerMagnaFordRenaultToyotaScania

HusqvarnaABBBombardierRolls-RoyceBoshSiemens

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


Highly educated and multilingual talent

• The right people• The right education• The right languages

Industrial parks

• The right industrial parks• The right cost advantages

Cost attractiveness

• The right labor cost savings• The right tax scheme

International accessibility

• The right location• The right direct flights

InKAUNAS REGION

it all comes together

Manufacturing workforce

• Kaunas region has a long history of mechanical engineering and machinery production• In Kaunas Region over 50,000 people are employed in the machinery sector, which is almost 20%

of the total workforce• The 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 English• The five universities in the Kaunas region have 9,000 students in technological sciences, which is

nearly half of all Lithuanian tech students• Production workers are largely available in the Kaunas Region with a > 10% unemployment

(2012)

KAUNAS REGION

Sources: Lithuanian Statistical Department, VRM, Invest Lithuania 2014

Source: wwww.kitron.com

KB 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.com

Kitron (Norway) Is an Electronics Manufacturing Services (EMS) company with operations in Norway, Sweden, Lithuania, Germany, China and USA.With 260 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 for customers globally.

Companies that selected Kaunas in the last two years for the availability of cost-effective, high quality labour


7Employer 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 REGION

Annual full employers cost skilled industrial worker (Euro)

* Source: Invest in Lithuania, FEZ Kaunas, FEZ Kėdainiai 2014

Tax General Free Economic Zone

Income tax 15 %0 % (first 6 years)

50% of the tax rate (subsequent 10 years)

Property tax 1 % 0 %

Dividend tax 15 % 0 %

Tax rates*

• In general, labour costs in Lithuania are less than half compared to Western European countries and the USA

• Kaunas 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 Hungary

• Standard 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 attractiveness

Kosice - Sk Katowice - Pl

Gyor - Hun

Gdansk - Pl

Tallinn - Est

Vilnius - Lith

Kaunas - Lith

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• Many 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

KAUNAS REGION

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, 2013

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• Two major trans-European corridors connect Lithuania’s 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 hours• The Port of Klaipeda, one of the northernmost ice-free ports in the world, is well connected to

Kaunas by road and rail infrastructure• A 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 basis

• Vilnius 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

• The 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 Kėdainiai 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: Kėdainiai FEZ, FEZ Kaunas, 2014

KAUNAS REGION

The Kaunas FEZ provides 294 hectares of logistics and production area


The Kėdainiai FEZ provides 9 ‘ plug-and-play’ plots

Industrial parks

Source: Invest Lithuania, 2014

KAUNAS REGION

Financial support available per FDI project in the field of services

Construction, Infrastructure, Salary costs Personnel training costs

Up to Euro 1.5 million Up to Euro 2 million

Max. possible support 3.5 million Euro

• Foreign 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 Lithuania’s 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 Lithuania

• The 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 market

Where Machinery comes togetherNational incentives support program

• Information• Consultancy• Analysis• Search• Guidance• Networking• Assistance• Aftercare

One stop shop

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Where Machinery comes together