Future of Vilnius, Tallinn and Riga: Lithuania can win on only one condition

The Baltic capitals Vilnius, Tallinn and Riga with similar indicators have always competed for the attention of foreign investors. However, recently analysts have been saying that Vilnius may break out within the next five years in terms of attracting investment, salaries, urban development and people’s quality of life, Indrė Naureckaitė wrote in lrytas.lt

When forecasting the future of the Baltic States, expert opinions have differed, yet one thing was agreed upon: if Vilnius does not solve its most significant problem, it will be difficult to talk about the region as a leader.

A common problem of Vilnius, Tallinn and Riga

Economist Alexander Izgorodin predicts the best economic prospects for Tallinn due to its focus on e-government services, the country’s developed brand innovation and IT, proximity to the Scandinavian countries and more comfortable employment conditions.

“Compared to Lithuania and Latvia, Estonia has a slightly better labour market policy – it is easier to employ foreigners after the reforms implemented in the country after the financial crisis. The close neighbourhood with Scandinavia also helps: it is much easier and cheaper to move a business from Finland to Tallinn than to the other capitals of the Baltic States,” A. Izgorodin told the news portal lrytas.lt.

Currently, Riga has several advantages over Vilnius – there is a bigger market out there and it has better connections.

“The development of Vilnius is most hindered, in my opinion, by Vilnius Airport – there should be significantly more flights. Their absence severely limits opportunities to attract investments. Riga’s airport is more developed – this is important in terms of business development. In recent years entrepreneurs often arrive in the morning, arrange business and fly out in the evening of the same day – there are not always such opportunities in Vilnius.” said the economist.

Vilnius is attractive in that it is positioned as the capital of service centres and financial technologies (FinTech): according to Izgorodin, the potential of Vilnius will grow, as a lot of work has already been done to attract service centres, and the FinTech infrastructure has been developed.

“Recently, we have managed to attract innovative FinTech companies, the city’s infrastructure and bicycle paths are developing well and the city is becoming friendlier to live in. However, the main disadvantage of infrastructure is the airport because it is outdated and too small. Vilnius could attract far more foreign investors, but the situation of the airport is unsatisfactory. In my opinion, Vilnius has already outgrown what the airport can handle.” A. Izgorodin assured.

According to the economist, to attract foreign companies all the Baltic countries face one common problem – they are unable to take advantage of the business environment and urban infrastructure due to the labour relations law and the labour import indicator.

“As reported by the data provided by the World Economic Forum, according to Ease of Hiring Foreign Labour, Lithuania ranks 112th out of 141 countries, Latvia – 113th place, Estonia – 132. The 3 Baltic countries and their cities are developing well, each has its advantages, but due to legal aspects, we are unable to reap those benefits. For example, now is a very good opportunity to attract investments from Belarusian IT companies but it will be difficult for them to choose Vilnius, Tallinn or Riga due to the fact that it is quite difficult to hire employees.” said A. Izgorodin.

Crown – for Vilnius

According to the economist Marius Dubnikovas, Vilnius stands out from the other Baltic capitals because it does not reflect the economic prospects of the entire country – other cities in Lithuania appear attractive to investors as well.

“Compared to other capitals of the Baltic states, Vilnius as a starting position looks good because it isn’t as concentrated or densely populated – one city is not the whole country. Also, Vilnius is a very green city. During the COVID-19 situation, we saw that employees appreciate this factor: people are increasingly in need of green space and working remotely has become more attractive. The nature of the country is a value that we should cherish in the future as well,” M. Dubnikovas told the news portal lrytas.lt.

According to the economist, Vilnius is likely to jump forward in terms of economic prosperity in the next five years.

“Vilnius will likely surpass other cities in terms of prosperity because it is the capital of a larger country – naturally, the further away, the more these differences should become clearer. The country with 2.7 million population is more potential than a country with one million population. If our country will be the richest of the three Baltic states, it is natural that our capital will also be the most prosperous,” the economist said.

According to M. Dubnikovas, Vilnius may be potentially attractive for investors due to its closer geographical position to Western countries.

“But one big problem is emerging and that is unfortunate air transport, a gap that we have had for many years. Despite all the attractions of Vilnius due to nature, Riga wins in this respect completely against all other capitals of the Baltic States as it has the airlines that connect with practically the whole world. Riga has the best accessibility, both externally and connections with other Baltic states,” said the economist.

Meanwhile, Tallinn’s advantage over other neighbouring capitals is its proximity to Finland, the economist assured. In addition, both Estonia and Riga surpass the transportation options found in Vilnius.

“Judging from the position of Vilnius, we are not only missing the airlines but also do not have Finland in our immediate vicinity. This would feed us as a capital and thus increase our attractiveness. The Scandinavians are very important – we need to understand that the biggest investors in our country are the Scandinavians.

Also, Riga and Tallinn are cities by the sea – highlighting that importance of maritime transport. Not only is the Lithuanian capital far from the sea, nor does it have airlines. Only the roads of Vilnius connect it with the outside world, but even then the train networks are not so attractive. In terms of transport, Kaunas has better prospects than the capital – the same Rail Baltica will pass through Kaunas,” said M. Dubnikovas.

However, after assessing the size and geography of the country, as well as the country’s nature, the economist predicts that Vilnius will wear the crown forxe.com the richest Baltic capital.

“However, to fully join the fight, we need to reconsider the limits of transportation: the country to which the planes do not fly has much fewer prospects,” Dubnikovas warned.

Latest data

According to the data provided by the Lithuanian Department of Statistics, the minimum wage “on paper” in the second quarter of 2020 was 607 euros in Lithuania, 430 euros in Latvia, and 584 euros in Estonia.

According to the Statistics Department of Estonia, the average wage “on paper” was 1,623 euros in the second quarter. Estonia does not collect data on average wages “in hand”.

The average salary “on paper” in Latvia in the second half of the year was 1117.3 euros, “in hand” – 824 euros, according to data provided by the Statistics Department of Latvia.

In Lithuania, the average salary “on paper” in the second quarter of 2020 amounted to 1398.5 euros, “in the hands” – 889.2 euros.

In 2020, there were 557,440 inhabitants in Vilnius, 437,619 in Tallinn and 627,487 in Riga.