Klaipeda FEZ Eyeing Expansion in Klaipeda District and Towards the Port

While the Klaipeda FEZ still has plenty of vacant lots for investors to move into, the operator of the zone is considering the possibility of expanding into the wider Klaipeda district in the future. This initiative is passionately supported by the district’s municipality, Verslo Zinios, Lithuania’s main business daily, reports.

“While the year started slower than the previous year, I believe that we will manage to meet our goals. We have 50 potential clients, we will likely sign contracts with four of them. These are massive investors, coming into the FEZ with their separate projects,” says Eimantas Kiudulas, the CEO of the company managing the Klaipeda FEZ.

The Klaipeda FEZ had a record-breaking 2018, with the 34 companies operating at the FEZ generating 1.2 billion EUR in revenue, 20% more than in 2017. Throughout last year, companies like Neo Group, Retal, Lavango, Indorama, and Ad Rem started or finished big expansion projects. Capella Baltica, Baltijos Eukutecas, Focus Fabrication Group, Etman, Vėjo projektai started or announced serious investment projects.

Turning into a business park

According to E. Kiudulas, some smaller investors should join the FEZ soon too. Last year, the Klaipeda FEZ successfully concluded its FlexStart project, which involved building 7,500 sq. m manufacturing premises with rentable space adaptable to the individual needs of a client in 1-2 months. Just after the building was finished, Baltijos Ekutecas, a Germany-based manufacturer of wiring for electric bikes, became its first tenant, with Etman, a Norwegian electronic equipment manufacturer, joining them soon after. Right now, the building is almost full.

“We were the first ones to offer a model like this. It proved its worth because there are more and more investors who don’t only need land but a space for quick launch of their business as well,” explains E. Kiudulas.

The CEO says that Klaipeda FEZ operator’s shareholders signed off on FlexStart 2, an 8,500 sq. m adaptable manufacturing plant, worth 3.5 million EUR. The building works should start in autumn and the building is expected to be operational in the first half of 2020.

“We started as an industrial park but we are turning into a business park, with signs of a transformation into a smart technologies park with one of the strongest business communities in Eastern Europe. If we want to attract smart tech companies, we have to use smart tech solutions,” says E. Kiudulas about the future of the Klaipeda FEZ.

The FEZ operator invested 6,000 EUR into adjustable street lighting for the park, several renewable energy, and smart tech projects are due to be completed in the FEZ in the upcoming year. The FEZ business community is also considering the idea of building a small spa with open geothermal pools.

The Klaipeda FEZ has enough space for new investors. The law dedicates 412 ha for the FEZ, around half of that number is vacant; however, 118 ha of land does not have set boundaries for plots, so it cannot be offered to investors. With that said, the FEZ operator is considering expansion into bigger territories.

“If several big industrial companies join the FEZ, and we are negotiating with a couple of them right now, all of that space could be moved into,” points out E. Kiudulas.

This is why the FEZ will have to expand into the Klaipeda District territory sooner or later, maybe even the industrial spaces close to the Port of Klaipeda, which are controlled by the Seaport Authority, if possible, according to E. Kiudulas.

“It’s more of a dream of ours and not the Klaipeda FEZ, to see the FEZ expand into the Klaipeda District. I visited the Prime Minister yesterday, we discussed it among other things. Soon, we should meet the Minister for the Economy and Innovation and FEZ managers to try and figure out how we could all join forces to get this process moving,” said Bronius Markauskas, the Klaipeda District Mayor.

According to the Mayor, the expansion could take utilize space close to Gargzdai and Rimkai, along the rail branch line, as well as on the other side of the road to Silute. Companies like Vlantana, the SBA technology and innovation park, Vakarų medienos grupė could use the perks associated with the FEZ.

E. Kiudulas says that the FEZ in the Klaipeda District could open up branches close to small towns, in dedicated industrial zones, which would be offered up to investors. The model where any plot in a municipality could be considered a FEZ territory with all related tax relief measures is proven successful in Poland.

“The clients would have a bigger assortment of choices and the FEZ could attract a wider variety of clients. Our FEZ is a good choice for the companies, which wish to be close to a big city, which need a lot of tech-savvy employees. However, there are companies, which cannot operate close to cities or which need less-qualified employees from smaller towns,” explains E. Kiudulas.

Opportunities at the Port

E. Kiudulas sees the Port of Klaipeda as the second possible option for the expansion of the Klaipeda FEZ in the future, if the port expands its industrial space at its borders.

“If the Port of Klaipeda expands as planned, we could be the best operator of the new territories possible. We know how to work with investors, we know companies, which put great importance on their proximity to the port. We would definitely offer up ourselves as candidates to operate the industrial part of the port,” says E. Kiudulas.

With that said, he admits that it remains a dream, which would take 5-7 years to become a reality. The Port of Klaipeda plan, which would include these industrial spaces, has not been made official.

“The Port plan dedicates 60 ha close to the south end of the port for manufacturing, warehousing and logistics. FEZ-like tax relief measures should also apply to this space. This space would not compete with the Klaipeda FEZ if it was operated by the same people,” says Artūras Drungilas, the Marketing Director for the Klaipeda State Seaport Authority.

Invest Lithuania recommends expanding FEZ territories because potential investors require bigger and bigger plots, sometimes taking up 70 or even 100 ha of space. According to the agency, now is the time when we should not only think about developing the FEZ territories we have but expanding some of them as well.