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Klaipeda FEZ – The Spine of the Western Lithuanian Economy

28 Nov 2019

Companies operating out of the Klaipeda FEZ have earned 1.2 billion EUR and exported products worth 610 million last year. Even though these statistics are the sum of the effort from all 34 FEZ companies, it still makes the zone the biggest employer in the region, the biggest foreign direct investment magnet of the city and the county, as well as a significant contributor to the country-wide economic statistics.

Let’s start with “The King”, gross domestic product. Even though this measure is more complicated than simple revenue, we can compare the Lithuanian GDP to the total revenue of the FEZ companies. The GDP of Lithuania last year was 45.2 billion EUR, while the total FEZ company turnover was 1.2 billion, which is 2.65% of the total Lithuanian GDP. It would be even more impressive when comparing the FEZ with the total GDP of the Klaipeda county, where the turnover from the FEZ companies accounts for around 22%.

When it comes to exports, the Klaipeda FEZ contribution can be counted even more accurately. The Klaipeda FEZ companies exported products worth 610 million EUR, which equals 2.15% of all Lithuanian exports. This share would be even bigger after removing one-time technical details, like a big FEZ investor deciding to formally export its products through a subsidiary operating out of another city. Undoing this decision would grow Klaipeda FEZ exports to 850 million EUR or a 2.95% share Lithuania-wide.

The FEZ is even more influential when counting foreign direct investments (FDIs). By the end of 2018, the Klaipeda FEZ collected 634 million EUR in FDI, which accounts for 66.7% of all foreign direct investments in the Klaipeda city or 50.4% after expanding to the Klaipeda county. The Klaipeda FEZ share in nation-wide FDI statistics accounts for 3.73% of the total.

Klaipeda FEZ has posted an increase of its contribution share in most of the metrics since last year: the numbers of 2018 are 0,46 p.p. bigger for country GDP, 0,23 p.p. bigger for Lithuania’s exports (excluding technical factors) and 0,25% bigger for the accumulated FDI in Lithuania. City and county-level metrics have also increased accordingly, while the number of employees working in the FEZ territory also grew by around 7%.

Klaipeda FEZ is also an important employer. If all investors operating out of the FEZ and employing 3,453 people were consider to be a single company, it would be the eighth largest employer in Lithuania. When we add up the other people working at other companies operating out of the FEZ, this organization would have 5,500 employes and be the fifth largest employer in the country, slightly behind the IKI market chain but bigger than Lietuvos pastas (the national postal service).

If Klaipeda FEZ was a united entity, it would be the biggest employer in the port city and the entire region of Western Lithuania. Out of the 80,100 people capable of work in Klaipeda, one in 15 works at the FEZ. Statistically, this number should be 1 in 7, but we understand that people commute from Klaipeda region, Kretinga, Silute, Palanga and other districts to work at the FEZ.

Zygimantas Mauricas, the Chief Economist at the Luminor bank, comments that the added value created by the industrial sector is only the tip of the iceberg because it creates work opportunities for other sectors as well.

“Every euro in added value created in the industrial sector creates two more euros in added value for other sectors: transportation, wholesale and retail, services, agriculture, finance, real estate, construction and energy,” says Z. Mauricas. “Keeping in mind that the majority of all Klaipeda FEZ companies are industrial, its total effect on the Lithuanian economy is around three times more significant than its direct contribution. In other words, the Klaipeda FEZ is, in a way, the spine of the regional economy, holding together its form.”

Eimantas Kiudulas, the CEO of the Klaipeda FEZ, agrees that the numbers show that the Klaipeda FEZ is a vital business hub in the region and Lithuania in its entirety.

“Invest Lithuania’s Free Zone Report showed this spring that Lithuania’s direct and indirect investments into free zones result in the country directly getting three times more out of it,” says E. Kiudulas. “It is also important that the numbers are not a statistical mind trick, our companies not only operate in a shared territory but are also building connections, experience-sharing initiatives and other projects together, as well as joining forces when making purchases. We are a community, which allows us to celebrate both common and our own results.”

At the moment, the major industries among the companies operating out of the Klaipeda FEZ are plastics, electric components and transportation, food processing, assembly, logistics, as well as some others. Some of them are not only manufacturing in Klaipeda, but also started R&D laboratories, centres for research, improvement and competency growth. In the short-term, the Klaipeda FEZ will aim at strengthening its position in alternative transportation and renewable energy sectors.

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