“According to the data of the Statistics Department, our country’s export to EU member states accounted for approximately 59 percent of total exports last year. The single market and its clear rules of the game are undoubtedly the strengths of the European Community, but companies are looking for buyers with higher solvency risks outside the EU, which can often offer more attractive profit margins. True, the search for new markets is often impeded by the higher risk of non-settlement by partners, plus some safeguards are required in order to get started in third-country markets. Therefore, companies willingly booking consultations on the options of insuring their exported goods,” says Aušrinė Černienė, Head of Business Financing Evaluation Department of Investicijų ir verslo garantijos UAB (Invega).
Companies show courage to expand export geography
In 2018, Invega provided export credit guarantees to companies for exports to Belarus, Russia, South Korea, South Africa, Saudi Arabia and other markets. There was also interest in exports to Egypt, Morocco, Malaysia, Ukraine and Moldova. In most cases, export credit guarantees were provided for the export of cardboard and cardboard packaging, alcoholic beverages, grains and flakes as well as smart technology devices.
Last year, 14 export credit guarantee agreements were concluded, which allowed Lithuanian companies to export their goods more safely to the above mentioned countries with non-marketable risks. The value of their guarantees amounted to EUR 537,000.
Last year, the biggest export guarantees were granted by Invega to two Lithuanian producers of alcoholic beverages and cardboard packaging for their exports to the CIS countries.
State backing is important for businesses
Small and medium business enterprises exporting goods of Lithuanian origin were supported in 2018, and since 2019 Invega has already started to insure the export of Lithuanian goods by large companies to countries with non-marketable risks.
Aivaras Knieža, Director of the Export Department of the entrepreneurship and export development agency Versli Lietuva, emphasizes that the main purpose of export insurance is to help Lithuanian companies enter new markets so they can compete with producers and exporters of other countries there.
“Export insurance is of interest to exporters who execute high-value foreign customer orders, export made-to-order products, are required to freeze large amounts of money, or start exporting to new, unfamiliar markets with a high risk of non-settlement. In some cases, companies themselves can absorb these risks, but this is especially relevant for smaller businesses. Export insurance should be considered as a risk management tool for companies which have orders the size of approximately 10 percent of their annual turnover,” Mr Knieža said.
With a guarantee of settlement, Lithuanian companies are not merely able to enter the new market, but also to become recognized players there. Such a status helps them establish themselves in order to reach new contracts there.
In addition to export credit guarantees, Lithuanian businesses have the opportunity to use Expo Consultant LT, an export consultancy measure administered by Invega. In total, 359 small and medium-sized enterprises have benefited from export consultations since the start of this measure, with more than EUR 1.4 million spent on the consulting services.
According to preliminary data of the Statistics Department, last year Lithuania’s exports increased by 7.3 per cent to EUR 28.3 billion, and the main export markets were Russia, Latvia, Poland and Germany.