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Klaipėda FEZ: shining bright on the investment map (The Baltic Times)

31 Jan 2024

The Klaipeda free economic zone (FEZ) in coastal Lithuania has witnessed several major transformations since its inception more than 20 years ago. First it changed from a literal green field next to the third largest Lithuanian city into a well-developed infrastructure for global manufacturers. In the 2010s it transformed again from a traditional manufacturing territory capitalizing on low costs into a community of product designers and researchers. And it met its third decade with a solid foundation in high technology, sustainability, the award-winning quick launch strategy and a sharing business community, writes The Baltic Times.

Today the Klaipeda FEZ is a thriving business ecosystem with more than 45 local and international investors that employ around 3000 colleagues. In 2022, the investors operating in the Klaipeda FEZ generated a total turnover of 1.76 billion Euros, while their exports amounted to 780 million Euros – this makes it the largest business hub in Western Lithuania.

Historically, the free zone has been specializing in plastics, metal constructions, electric components, energy and food processing. But its latest additions feature new generation companies from areas such as electric vehicles (including the makers of Dancer – Lithuania’s first electric bus) and biotechnology (including, but not limited to, Memel Biotech, the maker of advanced therapy products).

According to Eimantas Kiudulas, the CEO of the Klaipeda FEZ, even traditional manufacturers that had been working at the zone many years, opened new R&D centers, laboratories and product design capacities during the last decade. Some of them, including major PET manufacturer NEO GROUP or packaging manufacturer Retal Baltic Films, have either secured or seek international patents for their Klaipeda-born products and technologies. Companies such as architecture glass manufacturer Glassbel have been constantly innovating too with their facades that include solar modules or solutions that help prevent bird strikes. While biodiesel manufacturer Mestilla and many other companies have state-of-the-art laboratories and also significantly contribute to local and national economies via product and service purchases or paid taxes.

“This transformation didn’t come as a surprise given Klaipeda’s strong academic ecosystem. Great companies always look beyond tax and cost benefits – they seek to capitalize on talents and our city has been delivering in this regard. However, the world is increasingly competitive, good infrastructure is becoming a standard, and our free zone also had important decisions to make to stay ahead. This is how our quick launch, sustainability and high tech strategies were born,” says Kiudulas.

Smooth launch and expansion

Klaipeda FEZ investors always have benefited from a hands-on approach and tailored solutions provided by the free zone management company, resulting in quick business launch and willingness to expand operations. But in the mid-2010s, this natural distinction was cemented as the core quick launch strategy.

“We were living in a very competitive global environment back then, as Lithuania was becoming increasingly expensive after its EU and NATO accession. We realized, that time is a rare commodity that money can’t always buy. If you can shave off months, if not years, from your business launch estimate, you become very interesting to investors as that’s how they win precious time in truly competitive markets,” says Kiudulas.

The Klaipeda FEZ quick launch strategy manifests itself in a broad array of solutions. One of them is FlexStart – the family of segmented buildings for manufacturing companies that can be adapted to individual needs in less than a month. The first FlexStart building was launched in 2017 and was fully rented out even before its official completion. The second building repeated the success story in 2021-2022 and now the Klaipeda FEZ management company is developing the third FlexStart facility.

Even though the FlexStart buildings were designed with booming markets and new entries in mind, they proved themselves to be of value also during the pandemic and the turbulent times of 2022-2023 as numerous current Klaipeda FEZ investors used the facilities for speedy expansion. For instance, long-time Klaipeda FEZ investors such as packaging manufacturer Retal Baltic Films or electric component manufacturer Albright chose FlexStart to expand their current production lines instead of developing their own real estate.

Another display of the quick launch strategy at the Klaipeda FEZ is the hands-on approach of the management company. You could hear countless stories in the Klaipeda business community about how the FEZ team went the extra mile to facilitate smooth entry and expansions, strike meaningful partnerships and open various doors. One case, though, truly stands out – the way the German polymer giant REHAU entered Klaipeda.

REHAU officially opened its polymer pipe plant in December 2021. The 19000 sq m plant is the company’s first facility in Northern Europe. The factory, which was built in just one year, currently employs about 100 people, and the number is expected to grow.

“The REHAU plant project was implemented using extraordinary methods – Klaipeda FEZ and our partners did a lot of preparatory homework, including various permits even before the actual deal was made. We also announced an international tender for the development of the facility, which was won by an international development and construction giant YIT, and the plant was built according to the company’s needs. For the first time in the corporation’s history, REHAU outsourced the development and management of real estate to third parties. All this shaved months, if not years, from the launch deadline, demonstrated remarkable flexibility and won Klaipeda a prime investor that initially considered other countries for its facility,” Kiudulas recalls.

Recognition and community

The Klaipeda FEZ speed strategy won a special Quick Launch award – the first of its kind at the time – in the Free Zones of the Year Rankings by FDI Intelligence, a member of the Financial Times group. In fact, the Klaipeda FEZ won numerous other main awards, special prizes and honorable mentions in this publication over its history, including for customers’ expansions, new technologies, green energy, sustainability, non-fiscal incentives and contributions to local and national economies.

One area, though, really stands out in spite of official awards, Kiudulas states. That’s both the sense and the fact of community – within and beyond the free zone.

“We are not simply a territory – the Klaipeda FEZ is an actual, knowledge-sharing ecosystem where companies have regular meetings and events for finance, HR, project management and other professionals. Many Klaipeda FEZ companies provide commercial services to each other and share expertise, resulting in a strong ecosystem where one never feels alone,” says Kiudulas.

Over the past 20 years, the Klaipeda FEZ has established solid relationships with the key players of the city ecosystem: universities, schools, the municipality and its Klaipeda ID investment promotion agency, the Port of Klaipeda, various associations and NGOs. All of this is highly regarded by new and existing investors as these partnerships open doors to faster decision-making and various collaborations.

Perhaps unsurprisingly, this is felt by the residents of the city who are very often the employees of the Klaipeda FEZ investors. In early 2021, the Klaipeda FEZ carried out a reputation survey amongst 500 residents together with CIVITTA, a renowned Lithuanian business consultancy. Eighty per cent of respondents were fully or partially in agreement with the statement that the Klaipeda FEZ has a good reputation, and 78 per cent of respondents indicated they view the Klaipeda FEZ business community positively, while 70 per cent indicated they trusted the community. The local population mostly likes job opportunities, good management practices, innovation and sustainability and the free zone.

At the same time, as many as 9 out of 10 existing investors would recommend their experience in the Klaipeda free zone. According to Kiudulas, although reputation might seem as a “soft” metric, it actually results in smoother and faster operations.

“I think that our investor community showed Klaipeda that businesses can be a source of pride, knowledge and inspiration. When you are being supported in the city, your business is simply easier to run and to expand. This is another commodity money can’t buy and we’re extremely proud to have it here in Klaipeda,” the FEZ CEO says.

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