Transport and Logisticsin Lithuania:

Alchemistry of crossroads

Market Overview The international competitiveness of Lithuania in the transport and logistics sector is to a large extent determined by its geographical position. With approximately 80% of freight which is transported through international transport corridors passing through Lithuania, the country has become the most important transport centre in the European Union, linking the EU with the East, according to the market research company Datamonitor. The North-South highway, the railway route connecting Scandinavia with Central Europe, and the East-West route that connects vast Eastern markets with the rest of Europe, all figure among the 10 principal freight routes in Europe. The expansive network of central motorways and European railroads, along with the ice-free port of Klaipėda and 4 international airports comprise the key infrastructure of the Lithuanian transport network. Lithuania also has a wide and well-developed high-quality international and national road system. The total length of roads in Lithuania is approximately 79,500 kilometres.

Europe’s Prime Location and Infrastructure • Favourable geographical location - crossroads of North, East and West• EU’s prime transport centre: 2 Trans-European transport corridors crossing the country• Northernmost ice-free seaport on the eastern shore of the Baltic Sea is among the regional leaders• Very competitive transport and logistics costs• Expertise and experience in cooperation with Western and Eastern cultures• Well-developed and maintained rail and road transport network• 4 international airports• 4 multimodal public logistic centres, interconnecting sea, rail and road transport routes

Lithuania is a transit state creating a measurable added value, the gateway of logistics to the freight

flows from the Baltic region to Asia and European destinations.

Strategic Location Geographic Proximity

FINLAND

SWEDEN

NORWAY

UNITEDKINGDOM

NETHERLANDS

FRANCE

ITALY

TURKEY

ODESSA

NorthAtlantic ocean

North Sea

Mediterranean Sea

BalticSea

BlackSea

SPAIN

KIEV

URUMQIBEIJING

ALMA-ATA

MOSCOW

5 DAYS

3 DAYS

2 DAYS

2 DAYS

2 DAYS

4 DAYS

7 DAYS

4 DAYS

3-4 DAYS

15-20 DAYS

7-10 DAYS2-3 DAYS

2-3 DAYS

1-2 DAYS

3 DAYS2 DAYS LITHUANIA

DENMARK1 DAY

LATVIA

2 DAYSBELGIUM

1 DAY

POLAND

1 DAY

GERMANY

MINSK

Black Sea

NorthSea

NorthAtlantic ocean

RUSSIA

BELARUS

UKRAINE

POLANDGERMANYBELGIUM

FRANCE

DENMARK

FINLANDSWEDEN

NORWAY

LATVIA

ESTONIA

MediterraneanSea

CZECH REP.

ROMANIA

UNITEDKINGDOM

IRELAND

ITALY

BULGARIA

GREECE TURKEY

AUSTRIAHUNGARY

LUXEMBOURG

NETHERLANDS

BalticSea

SPAIN

PORTUGAL

LITHUANIA

110 millionBaltic Sea

Regionpopulation

340 millionWestern European

population

250 millionCIS population

Two routes of the international Trans-European transport corridors cross the territory of Lithuania:• I North-South direction corridor (highway “Via Baltica”)

connecting Tallinn, Riga, Panevėžys, Kaunas, Warsaw and its branch IA (Tallin-Riga-Šiauliai-Tauragė-Kaliningrad)

• IX East-West direction corridor - branch IX B (Kiev-Minsk-Vilnius-Kaunas-Klaipėda) and branch IX D (Kaunas-Kaliningrad)

Lithuanian Transport Policy priorities:• Development of North-South transport axis:

Rail Baltica railwayVia Baltica international motorway

• Modernization of East-West transport axis:Public logistics centresCombined transportation

• Klaipėda deep water avant-port

I North-South direction corridor and its branch IA

IX East-West direction corridor - branch IXB and branch IXD

Combined transport shuttle train "Viking"

Rail Baltica

Via Baltica

KALININGRAD

TALLINN

HELSINKI

NETHERLANDS

WARSAW

RIGA

Baltic Sea

GDANSK

KIEV

ILJICHEVSK

VILNIUSMINSK

KLAIPĖDA

I

I

I

IA

IXB

ŠIAULIAI

TAURAGĖKAUNAS

IXD

IXB

Northern Europe Service HUB 2015 The Lithuanian Government has set a strategic goal to be achieved by the country by the year 2015 - to become the Northern Europe Service Hub. By 2015 the share of exports of services should make approximately 1/2 of Lithuania’s total exports. Similarly, it is expected that 1/2 of the total FDI in Lithuania will settle down in the services sector by 2012.

Excellent Infrastructure and Communications Network

80% of the European freight istransported through international transport

corridors passing through Lithuania.

Modal Transport Lithuanian railways carry approximately 50 million tons of cargo and 7 million passengers per year. Direct rail routes link Lithuania with Russia, Belarus, Latvia, Poland, Ukraine, Germany and the rest of Europe, the main transit route between Russia and its Kaliningrad district passes Lithuania. The combined traffic train Viking, which connects the Black and the Baltic Seas (the train leaves from Ilyichevsk port, goes through Kiev, Minsk and Vilnius and reaches Klaipėda in 55 hours (1734 km)), has been operated with success over the past years. In 2010, this container train carried a record number of 41,804 containers (TEU). The delivery time is extremely short, although the train has to cross the state borders of two European Union non-member states on its way. The procedures of crossing the borders take less than 30 minutes. In 2009, the European Intermodal Association announced this project the winner of the 9th annual European - Intermodal Award for best practices.

Lithuanian Railways are at the crossroads of International Freight Transportation Corridor

Compared to neighbouring Eastern Baltic seaport, the port of Klaipėda has the widest shipping lines network with other seaports

FINLAND

SWEDENNORWAY

UNITEDKINGDOM

GERMANY

FRANCE

ITALY

TURKEY

ODESSA

NorthAtlantic ocean

North Sea

MediterraneanSea

BalticSea

Black Sea

SPAIN

KIEV

DENMARK

LATVIA

ESTONIA

BELGIUM

POLANDBELARUS

UKRAINE

KLAIPĖDA

ILLICHIVSK

VILNIUSMINSK

LITHUANIA

Container train “Viking„

East-West direction corridor

North-South direction corridor

The combined transport shuttle train ” Viking” carries freight that reaches Klaipėda from the

Scandinavian and other European countries and transports it further to Belarus and Ukraine in an extremely short delivery time with

border-crossing and custom procedures taking only 30 minutes.

NorthSea

NORWAY

BalticSea

LITHUANIA

TALLINN

RIGA

KLAIPĖDA

VILNIUS

MINSK

KIEV

ST.PETERSBURG

HELSINKI

RAUMA

KOTKA

KALININGRAD

GDANSKSZCZECINSASSNITZ

GDYNIAKIEL

HAMBURG

AMSTERDAM

ROTTERDAM

BREMERHAVEN

ANTWERP

LE HAVRE

BERLIN

WARSAW

KARLSHAMN

CANADAUSA

SOUTH-EAST ASIASOUTH AMERICA

AFRICA

SÖDERTÄLJE

GÄVLE

COPENHAGENFREDERICIA

HULL

FELIXSTOWE

TILBURYRo-Ro lines Container lines General cargo lines

Hinterland transportation of all three types of cargo

TEESPORT

BALTIYSK

Klaipėda seaport is container handling leader in the region

and the northernmostice-free seaport

on the eastern shoreof the Baltic Sea.

Lithuania plays an important intermediary role in transportation of goods from Asian markets to European countries. The modern and technologically well-equipped Klaipėda Seaport is a deep-water seaport providing facilities for long-distance carriage of cargo from Eastern to Western Europe and other continents. The seaport is the northernmost ice–free port on the Eastern coast of the Baltic Sea, with the capacity of 40-45 million tons a year. Klaipėda Seaport has maintained leadership among the Eastern Baltic ports for the last seven years. In 2010, Klaipėda Seaport container handling reached 295.000 TEU or 19 % more than in 2009. According to Business Monitor International report, the ice-free port turnover shall continue to grow at around 6 % per annum surpassing 380.000 TEU by the end of the forecast period of 2011-2015. Dealing with cargo going to and from Russia and Kazakhstan at one end, the port also handles shipments to and from Germany, the Netherlands, the US, South America, Asia, and other destinations.

Lithuania’s 4 international airports have all been included in the Trans-European Transport Network (TEN-T). Inland waters in Lithuania add up to a total length of 902 km, of which 425 km are used to carry freight and passengers. Inland waterway route along the Nemunas River from Kaunas to Klaipėda is a part of the TEN-T network.

Logistics Centres The Government of Lithuania aims to establish public logistics centres of new generation. Modern public logistics centres in Vilnius, Kaunas, Klaipėda and Šiauliai regions shall be established within next five years. Logistics centres, integrated in the international transport corridors, will be located close to the major railway lines and motorways, the railway stations and Klaipėda seaport. They will be well integrated into the common network of European logistics centres and ensure the interoperability of different transport modes in trans-European transport corridors.

The greatest supply of modern warehousing facilities in 2010 remained in Vilnius (334.400 m2), with Kaunas following in the 2nd place (184.300 m2), and Klaipėda in the 3rd place (123.600 m2).

The overall supply of modern warehousing facilities in Lithuania in 2010 accounted for approximately 703,000 m2.

In 2010 the rents of both new and old warehousing premises in Vilnius, Kaunas and Klaipeda regions have seen an average decrease of approximately 10% (with 2009 fall of rents of approximately 35-40%). New warehousing premises are now offered for rent in Vilnius at 2.3–4.3 EUR/sqm, and of old premises of 1.2–2 EUR/sqm.Kaunas and Klaipėda show rents of new warehousing premises at 2-3.8 EUR/sqm, and the rents old premises at 0.9-2 EUR/sqm.In 2011 Q1, warehousing rental costs remained stable and varied from 1.2 to 4.1 EUR in Vilnius, from 0.9 to 3.5 EUR in Kaunas and from 0.9 to 3.8 EUR in Klaipėda.

State’s Strategic Transport and Logistics Projects for Public Private Partnership (PPP)

Project Title Project Value Short Project Description

Rail Baltica & Kaunas Public Logistics Centre

EUR 275 millionConstruction of the railway line of the European standard from the Polish and Lithuanian border to Kaunas. Public Logistics Centre

Via Baltica road section EUR 145 million Reconstruction of Via Baltica road section Mauručiai-Puskelniai (34.5 km)

Vilnius Public Logistics Centre EUR 35 millionDevelopment of centre’s public logistics infrastructure and intermodal terminal

Klaipėda Public Logistics Centre EUR 30 millionDevelopment of centre’s public logistics infrastructure and intermodal terminal

Outer deep-water seaport EUR 1 billion Construction of outer deep-water seaport

Vilnius-Utena road section EUR 35 million Reconstruction of road section (total 60 km)

Source: Invest Lithuania

Largest Logistics Centres Area, m2 City

Senukai Logistics Park 70,000 Kaunas

Laistai International Trade Center 32,000 Klaipėda

Tromina 30,000 Vilnius

Kaunas Terminal 30,000 Kaunas

Business Park E67 28,000 Panevėžys

Dobrovolė Logistics Centre 27,500 Vilnius

AD REM Logistics Centre 27,000 Vilnius

Via Baltica Logistic 27,000 Kaunas

Kirtimai Logistics Centre 26,500 Vilnius

Klaipėda Business Park 24,000 Klaipėda

Žarijų BPT Logistics Centre 21,900 Vilnius

GLC Logistics Centre 21,600 Vilnius

Vingės terminalas 21,500 Vilnius

Vilijos Business Park 21,000 Vilnius

Lavisa Customs Warehouse 21,000 Kaunas

Vingės logistika 20,000 Klaipėda

Source: Invest Lithuania, Colliers International

ToP 5 Logistics operators GLA (m²)

Girteka UAB 100,000

Ogmios Group 80,000

Vingės logistikos grupė 54,000

VPA Logistics UAB 47,000

Ad Rem UAB 42,000

Source: Invest Lithuania, company data

Quality Index Cost Index

The aim of the benchmarks is to identify the most attractive location for a particular investment project.

This study highlights Lithuania’s absolute advantage against other European locations in terms of the lowest labour costs, general business environment and living environment.

Location Labour Cost

Czech Republic 3,144,354

Denmark 8,211,332

Finland 7,200,064

Germany 9,185,569

Lithuania 1,900,580

Poland 2,335,363

Sweden 8,292,884

UK 4,952,070

Source: fDi Intelligence,from the Financial Times Ltd (2011)

LITHUANIA Czech Rep. Denmark Finland Germany Poland Sweden UK

140

120

100

80

60

40

20

0

Case study: Logistics centre benchmark by fDi Intelligence from the Financial Times Ltd (2011)

fDi Benchmark – Location Attractiveness Index

The benchmark study examines the following key investment criteria for establishing and operating a Logistics centre in Lithuania, Poland, Germany, Finland, Denmark,

Sweden, Czech Republic, and the UK: (1) costs competitiveness, including labour costs and other operating costs, and (2) quality competitiveness,

including general business environment, labour availability and quality, presence of an industrial cluster, infrastructure and

accessibility, and living environment.

Lithuania today offers one of the most

attractive value-for-money solutions in Europe, when it

comes to establishing a logistics centre.

fdi Intelligence, from the Financcial Times Ltd

FDI Attractiveness Index

Germany Poland Estonia Finland Germany Latvia Sweden LITHUANIA

25

20

15

10

5

0

Logistics Costs by Region as % of Turnover,Manufacturing Companies (n=450)

Source: LogOn Baltic: State of Logistics in the Baltic Sea Region Report

Container Throughput in the Baltic Sea ports, thous. TEU

KLaIPėDa Riga Tallinn Ventspils

400

350

300

250

200

150

100

50

0

214

232

321

373

248

295

169177

212207183

254

128

181

131152 152

181

117

0.3814

014

Source: seaports’ data

2005

2006

2007

2008

2009

2010

Major Trading Partners Exports by Country of Origin, %, 2010

RussiaGermanyLatviaPolandNetherlandsBelarusEstonia

United KingdomUkraineSwedenFranceDenmarkOther

23.215.6

9.8

9.6

7.7

5.55.25.0

4.93.6

3.6

3.3

3.0

All other logistics costs

Logistics administration costs

Inventory carrying costs

Warehausing costs

Transportation costs

Imports by Country of Origin, %, 2010

RussiaGermanyPolandLatviaNetherlandsItalySweden

BelgiumEstoniaFranceChinaFinlandOther

17.5

32.6

10.9

8.86.34.4

3.33.3

3.22.92.62.41.8

Source: Statistics Lithuania

Lithuania has muchto offer the foreign investor

seeking to set up in the Baltic regionas a springboard to the East

as well to the wider European market.

UK Trade & Investment, Cambridgeshire

The Baltics offer lower coststhan Western Europe but with

the regulatory certainty of the EU. Financial Times

Salary RatesLabour costs in Lithuania are more than twice lower than those in other EU countries and the US. The minimum monthly wage in Lithuania is currently 232 EUR, and the minimum hourly wage is 1.4 EUR. The average gross monthly earnings have decreased due to the economic recession. after reaching a peak of 672 EUR in 2008 Q3, they reached ~600 EUR in 2011.

Average yearly gross salaries of Transport and Logistics personnel, EUR

Role Lithuania Czech Republic Denmark Finland Germany Poland Sweden UK

Business Unit Manager 44,070.99 63,848.39 86,902.65 83,954.04 112,992.45 45,990.31 93,265.99 69,472.35

Sales Executive 17,021.02 25,698.03 56,587.17 50,659.04 67,183.64 16,846.07 55,619.54 37,432.44

Head of Logistics 78,922.32 114,339.86 120,363.64 121,821.80 156,148.00 83,241.47 140,903.83 120,550.03

Junior Warehouse Operative 6,182.22 9,722.35 35,371.15 26,896.60 38,832.67 7,472.62 38,114.62 19,513.49

Logistics Clerk 10,096.43 15,878.53 42,777.07 38,948.50 49,044.11 10,474.89 42,578.20 24,298.16

Logistics Officer 12,732.06 19,222.58 46,935.07 40,621.93 55,048.29 12,205.80 45,026.52 28,613.13

Logistics Supervisor 15,893.66 23,995.97 52,839.21 47,303.72 62,733.84 15,730.29 51,935.67 34,953.17

Senior Warehouse Operator 7,621.83 11,986.81 43,374.85 36,285.15 45,159.77 9,088.99 40,851.04 22,028.09

Warehouse and Distribution Operative 7,536.02 11,851.86 42,886.51 35,876.64 44,651.34 8,986.66 40,391.12 21,780.09

Warehouse Manager 23,779.47 35,902.04 61,428.92 54,933.34 76,294.32 24,110.37 63,300.46 45,225.00

Warehouse Supervisor 11,730.22 17,710.02 43,241.90 37,425.53 50,716.72 11,245.37 41,483.53 26,361.65

Facilities/Office Services Specialist 18,156.49 27,412.69 56,077.22 48,610.67 67,706.08 17,800.60 53,647.38 36,783.03

Driver LGV Class C&E 12.348,00 18.642,00 50.004,00 43.368,00 56.481,00 11.281,00 47.438,00 28.888,00

Truck Driver (heavy and tractor-trailer) 10.381,00 16.327,00 43.985,00 40.049,00 50.430,00 10.770,00 43.781,00 24.984,00

Source: Based on Watson Wyatt and National Statistics 2011: fDi Intelligence from the Financial Times 2011

Tax Incentives and Financial Support Tax incentives applied to businesses establishing in Lithuania cover:

• Tax incentives for investments into new technologies • Tax ”holidays” in 2 free economic zones• 0% taxation on dividends when an investor controls at least 10% of

voting shares in the enterprise for the period of at least 12 months• Land and real estate tax relieves offered by individual municipalities

Average monthly gross wages, EUR, 2010

3500

3000

2500

2000

1500

1000

500

0

Roman

ia UK

Hunga

ry

LITHUANIA

Latvi

a

Bulga

ria

Czec

h. Re

p.

Slove

nia

Croa

tia

Slova

kia

Finlan

d

326437

600 631 714 782 843 9321030

1475

756

Eston

ia

2173

3032

Polan

d

Source: WageIndicator Foundation, Statistics Lithuania

Corporate profit tax incentives for investments into new technologiesCompanies carrying out investments into new technologies can reduce their taxable profit by up to 50%. Investment expenses exceeding this sum can be postponed to later, consecutive tax periods (up to five years).

Tax incentives in Lithuania’s 2 free economic zones (Klaipėda and Kaunas)

• 0% corporate tax during the first 6 years and only 50% of corporate tax over the next 10 years

• 0% tax on dividends• 0% real estate tax

Information and Service Point INVEST LITHUANIA is a team of more than 30 professionals actively working to facilitate foreign

investors in Lithuania, as well as to spread the word all around the globe about immense business opportunities on the biggest market among the Baltic countries. INVEST LITHUANIA is ready to make your dreams turn into a real

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Major Foreign Investors in Transport and Logistics

www.investlithuania.com